Changing the base of the index, Mathematics

Changing The Base Of The Index

For comparison reasons if two series have different base years, this is difficult to compare them directly. In such cases, it is essential to change the base year of one of the series or both so that both contain the similar base.

This is also necessary to maintain the index relevant to current conditions thus require changing the base from time to time.

Illustration

Year

1985

1986

1987

1988

1989

1990

1991

1992

Price index

100

104

108

109

112

120

125

140

Assume we wish to change the base year to 1989 year mWe re-calculate each index by expressing it as a percentage of years 1989

 

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While changing the base year, it is advisable to update the weights utilized in the base year.

Posted Date: 2/18/2013 2:21:52 AM | Location : United States







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