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Methods explained: the GDP implied deflator
Introduces readers to this concept, measuring changes in the overall level of prices for goods and services within GDP
Author: Anis Chowdhury
Economic & Labour Market Review, vol 2, no 6, pp 53. ISSN: 1751-8334
This article introduces readers to the concept of the Gross Domestic Product (GDP) implied price deflator. The GDP implied deflator is used to measure changes in the overall level of prices for the goods and services that make up GDP. It is an important indicator in the National Accounts as it distinguishes output growth that comes about due to volume increase and that which is due to price changes. In effect, the GDP implied deflator illustrates how much of the change in nominal GDP from one year to another reflects changes in the price level. It is referred to as the implied deflator: for example, if GDP increases by 2 per cent in real terms and 5 per cent in nominal terms, the implied economy-wide rate of inflation is 3 per cent.
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