An Input-Output Based Measure of Underlying Domestic Inflation in Denmark 1903-2002

Working paper no 34, 2006

Authors Abildgren, Kim
Subject Danish Economy; Inflation, wages and prices
Type Working paper
Year 2006
Published 14 March 2006
The paper analyses the development in inflation in Denmark during the last century. New time-series data for the underlying domestic inflation in Denmark 1903-2002 is constructed by stripping the development in the private consumption deflator for price increases caused by imports, indirect taxes and gross rents. The stripping builds on an annually updated input-output based decomposition of the private consumption into its direct and indirect content of imports, indirect taxes, rents and other items. The analysis seems to suggest that the input-output based price measure paints a fundamentally different picture of the inflationary development than the private consumption deflator in periods characterised by large structural movements in the relative prices or periods with high inflation volatility. An input-output based measure of the underlying inflation can therefore be a useful supplement to other types of information in studies on the historical inflation trends.