Forecasting Business Conditions

By Charles O. Hardy; Garfield V. Cox | Go to book overview
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CHAPTER XXII
PRICE INDEXES

Although two organizations have lately succeeded in constructing price indexes which for recent years move in advance of general prices and of basic industrial production,2 the price indexes thus far currently published are not designed primarily as forecasting devices. Price changes are of such interest that indexes are used extensively to tell us what present conditions are, and how they compare with past conditions, quite apart from any consideration of their significance as forecasters. Indeed, a major part of the interest in forecasting arises from a desire to predict the course of prices.

Under these conditions it is not surprising that a wide variety of price indexes are maintained. In the following pages we offer a summary description and comparison of the indexes which are best known and most widely used.3

____________________
1
In this chapter we have made use of material previously published by Mr. Cox under the title "Price Indexes in the United States," University Journal of Business, June. 1924, pp. 263-287.
2
One of these is the "new sensitive index" of prices constructed by the Harvard Economic Service and described briefly in a footnote on p. 90, but not yet published currently. The other has been computed by the Federal Reserve Bank of New York, but is still in tentative form and treated as confidential.
3
Those interested in the best possible formula for the computation of price indexes should read Fisher The Making of Index Numbers, an experimental study which subjects to critical tests practically every primary formula which may be derived from combinations of the different methods of averaging and weighting. Fisher's study does not, however, examine the index numbers now in use.

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