Glossary of Terms

Glossary of Terms Accrual accounting otherwise combined, to obtain price indices for higher- level aggregates. The recording of the value of a purchase or other trans- action at the time the obligation to pay is incurred, as ASYCUDA distinct from the time payment is made. For an XPI and an MPI, this means that the prices of goods are gener- Automated System for Customs Data. A computer sys- ally recorded at the time of shipment and the prices of tem designed by UNCTAD (United Nations Confer- services at the time of delivery. ence on Trade and Development) for the immediate verification of customs declarations. It ensures that Additivity declarations contain all information required, including quantity information, in order to receive customs At current prices, the value of an aggregate is equal clearance. The system also validates customs values to the sum of its components. Additivity requires this by matching the unit values on the declarations against identity to be preserved for the extrapolated values those for a predetermined list of commodity prices. of the aggregate and its components when their current values in some period are extrapolated using a Asymmetric index set of interrelated quantity indices; or, alternatively, when the current values of the aggregate and its com- An index that does not treat the two periods being ponents in some period are deflated using a set of compared in a symmetric or balanced way by attaching interrelated price indices. See also “consistency in equal importance to the price and value data in both aggregation.” periods. For example, the Laspeyres price index, the Paasche price index, and the Palgrave price index are Aggregate asymmetrically weighted price indices: the Laspeyres because it uses the value shares of the base period, the A set of transactions relating to a specified flow of Paasche and Palgrave because they use the value shares goods and services, such as the total exports produced of the current period. by resident establishments in a given period or the total imports of intermediate inputs made by resident estab- Axiomatic approach lishments in a given period. The term “aggregate” is also used to mean the value of the specified set of The approach to index number theory that determines transactions. the choice of index number formula on the basis of its mathematical properties. A list of tests is drawn up, each test requiring an index to possess a certain prop- Aggregation erty or satisfy a certain axiom. The choice of index is The process of combining different sets of transactions made on the basis of the number of tests satisfied. Not to obtain a larger set of transactions. The larger set is all tests may be considered equally important, and the described as having a higher level of aggregation than failure to satisfy certain key tests may be considered the sets of which it is composed. The term “aggrega- sufficient grounds for rejecting an index. An important tion” includes the process of adding the values of lower- feature of the axiomatic approach is that prices and level aggregates to obtain higher-level aggregates. In quantities are considered as separate variables and no the case of price indices, it means the process by which account is taken of possible links between them. Also price indices for lower-level aggregates are averaged, or known as the “test approach.” 603 ©International Monetary Fund. Not for Redistribution EXPORT AND IMPORT PRICE INDEX MANUAL: THEORY AND PRACTICE Base period and other goods not elsewhere classified. The categories and subcategories of the classification are defined The base period is generally understood to be the period in terms of SITC Rev.3 basic headings. with which other periods are compared. However, the term is not a precise one and may be used to mean Bias rather different things. Three types of base period may be distinguished: A systematic tendency of the calculated index to diverge from some ideal or preferred index. Bias can arise for a • The price reference period—the period that pro- number of reasons, including the design of the sample vides the prices to which the prices in other periods selected, the price measurement procedures followed, are compared. The prices of the price reference the data processing methods used, and/or the index period appear in th e denominators of the price rela- number formula employed. tives used to calculate the index. • The weight reference period—the period, usually Bilateral price index one or more years, whose values serve as weights The value ratio decomposition approach to index num- for the index. When the values are hybrid (that is, bers involves breaking down the value ratio between the quantities of one period are valued at the prices two periods into two numbers: one representing the of some other period), the weight reference period is price change between the two periods and the other the period to which the quantities refer. representing the quantity change between the two peri- • The index reference period—the period for which ods. The resulting price index is called a “bilateral the index is set equal to 100. price index.” “Bilateral” refers to the assumption that the price index depends only on price and quantity data The three reference periods may coincide but frequently pertaining to the two periods being compared. do not. Book price Base-weighted index See “list price.” See “Laspeyres price index.” Bouncing Basic price The fluctuation or oscillation of prices up and down in The amount received by the producer from the pur- a persistent pattern. chaser for a unit of good or service produced as output. It includes subsidies on products and other taxes on BPM6 production. It excludes taxes on products, other subsidies on production, supplier’s retail and wholesale Balance of Payments and International Investment margins, and separately invoiced transport and insur- Position Manual, Sixth Edition. An internationally ance charges. Basic prices are the prices most relevant agreed set of accounts summarizing the economic for decision making by suppliers. relationships between residents of an economy and the rest of the world. The accounts provide an integrated Basket framework for recording an economy’s international current, capital, and financial account transactions, and A specified set of quantities of goods and services for the financial assets and liabilities of its residents vis-à- which prices are collected for the purpose of compiling vis nonresidents. See also “EBOPS.” an index. Business register Basket price index A register or list of enterprises or establishments See “Lowe index” and equation (G.1) in the Appendix. involved in productive activities that is maintained by countries, often by their national statistical institutes, BEC to provide the frame for carrying out their economic Classification by Broad Economic Categories. An censuses and surveys. Such registers usually con- internationally agreed classification that groups com- tain information on location, economic activity, size modities according to their main end use: consumption (employment, payroll, annual production, or turnover), goods, intermediate goods, capital goods, dual-purpose contact persons, links with tax and other administra- goods (motor spirit, passenger motor cars), and military tive registers, etc. 604 ©International Monetary Fund. Not for Redistribution GLOSSARY Carli price index Circularity An elementary price index defined as the simple, An index number property such that the algebraic product or unweighted, arithmetic average of the current to of the price index comparing period i with period j and base period price relatives. the price index comparing period k with period j is equal to the price index that compares period k directly with pt P ϵ __1 ͚ __ period i. The property is also known as “transitivity.” C n ΂p0΃ When the axiomatic approach is used, a price index num- Carry forward ber may be required to satisfy the “circularity test.” The situation in which a missing price for a product in COLI the current period is imputed as being equal to the last price observed for that product. Cost of living index. An index that measures the change between two periods in the minimum expenditures that Chain index would be incurred by a utility-maximizing consumer, whose preferences or tastes remain unchanged, in order An index number series for a long sequence of peri- to maintaining a given level of utility (or standard of ods obtained by linking together index numbers span- living or welfare). Because consumers may be expected ning shorter sequences of periods, each with their own to change the quantities they consume in response to weights. The linking may be made as frequently as the changes in relative prices (the “substitution effect”), weights change and the data permit, or at specified the COLI is not a fixed-basket index. COLIs cannot be intervals, such as every five or ten periods. Each link in directly calculated but may be approximated by super- the chain consists of an index comparing each period lative indices. A conditional cost of living index is one with the previous period. See also equation (G.6) in the that assumes that all the factors that may influence the Appendix. consumer’s utility or welfare other than prices (such as the physical environment) do not change. Chain linking Splicing together two consecutive sequences of price Commensurability test indices that overlap in one or more periods. When the See “invariance to changes in the units of measurement two sequences overlap by a single period, the usual test.” procedure is simply to rescale one or another sequence so that the value in the overlap period is the same in Commodity both sequences and the spliced sequences form one continuous series. More complex methods may be used A generic term for a good or a service, interchangeable to link indices that overlap by more than one period.

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