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