elemental_index {piar}

Make elemental price indexes

Description

Compute period-over-period (chainable) or fixed-base (direct) elemental price indexes, with optional percent-change contributions.

Usage

elemental_index(x, ...)

## Default S3 method:
elemental_index(x, ...)

## S3 method for class 'numeric'
elemental_index(
  x,
  period = gl(1, length(x)),
  ea = gl(1, length(x)),
  weights = NULL,
  ...,
  chainable = TRUE,
  na.rm = FALSE,
  contrib = FALSE,
  r = 0
)

Arguments

x

Period-over-period or fixed-base price relatives. Currently there is only a method for numeric vectors; these can be made with price_relative().

...

Further arguments passed to or used by methods.

period

A factor, or something that can be coerced into one, giving the time period associated with each price relative in x. The ordering of time periods follows of the levels of period, to agree with cut(). The default assumes that all price relatives belong to one time period.

ea

A factor, or something that can be coerced into one, giving the elemental aggregate associated with each price relative in x. The default assumes that all price relatives belong to one elemental aggregate.

weights

A numeric vector of weights for the price relatives in x, or something that can be coerced into one. The default is equal weights.

chainable

Are the price relatives in x period-over-period relatives that are suitable for a chained calculation (the default)? This should be FALSE when x contains fixed-base relatives.

na.rm

Should missing values be removed? By default, missing values are not removed. Setting na.rm = TRUE is equivalent to overall mean imputation.

contrib

Should percent-change contributions be calculated? The default does not calculate contributions.

r

Order of the generalized mean to aggregate price relatives. 0 for a geometric index (the default for making elemental indexes), 1 for an arithmetic index (the default for aggregating elemental indexes and averaging indexes over subperiods), or -1 for a harmonic index (usually for a Paasche index). Other values are possible; see gpindex::generalized_mean() for details.

Details

When supplied with a numeric vector, elemental_index() is a simple wrapper that applies gpindex::generalized_mean(r)() and gpindex::contributions(r)() (if contrib = TRUE) to x and weights grouped by ea and period. That is, for every combination of elemental aggregate and time period, elemental_index() calculates an index based on a generalized mean of order r and, optionally, percent-change contributions. The default (r = 0 and no weights) makes Jevons elemental indexes. See chapter 8 (pp. 175–190) of the CPI manual (2020) for more detail about making elemental indexes, and chapter 5 of Balk (2008).

The default method simply coerces x to a numeric vector prior to calling the method above.

Names for x are used as product names when calculating percent-change contributions. Product names should be unique within each time period, and, if not, are passed to make.unique() with a warning. If x has no names then elements of x are given sequential names within each elemental aggregate.

The interpretation of the index depends on how the price relatives in x are made. If these are period-over-period relatives, then the result is a collection of period-over-period (chainable) elemental indexes; if these are fixed-base relatives, then the result is a collection of fixed-base (direct) elemental indexes. For the latter, chainable should be set to FALSE so that no subsequent methods assume that a chained calculation should be used.

By default, missing price relatives in x will propagate throughout the index calculation. Ignoring missing values with na.rm = TRUE is the same as overall mean (parental) imputation, and needs to be explicitly set in the call to elemental_index(). Explicit imputation of missing relatives, and especially imputation of missing prices, should be done prior to calling elemental_index().

Indexes based on nested generalized means, like the Fisher index (and superlative quadratic mean indexes more generally), can be calculated by supplying the appropriate weights with gpindex::nested_transmute(); see the example below. It is important to note that there are several ways to make these weights, and this affects how percent-change contributions are calculated.

Value

A price index that inherits from piar_index. If chainable = TRUE then this is a period-over-period index that also inherits from chainable_piar_index; otherwise, it is a fixed-based index that inherits from direct_piar_index.

References

Balk, B. M. (2008). Price and Quantity Index Numbers. Cambridge University Press.

ILO, IMF, OECD, Eurostat, UN, and World Bank. (2020). Consumer Price Index Manual: Theory and Practice. International Monetary Fund.

See Also

price_relative() for making price relatives for the same products over time, and carry_forward() and shadow_price() for imputation of missing prices.

as_index() to turn pre-computed (elemental) index values into an index object.

chain() for chaining period-over-period indexes, and rebase() for rebasing an index.

aggregate() to aggregate elemental indexes according to an aggregation structure.

as.matrix() and as.data.frame() for coercing an index into a tabular form.

Examples

library(gpindex)

prices <- data.frame(
  rel = 1:8,
  period = rep(1:2, each = 4),
  ea = rep(letters[1:2], 4)
)

# Calculate Jevons elemental indexes

with(prices, elemental_index(rel, period, ea))

# Same as using lm() or tapply()

exp(coef(lm(log(rel) ~ ea:factor(period) - 1, prices)))

with(
  prices,
  t(tapply(rel, list(period, ea), geometric_mean, na.rm = TRUE))
)

# A general function to calculate weights to turn the geometric
# mean of the arithmetic and harmonic mean (i.e., Fisher mean)
# into an arithmetic mean

fw <- grouped(nested_transmute(0, c(1, -1), 1))

# Calculate a CSWD index (same as the Jevons in this example)
# as an arithmetic index by using the appropriate weights

with(
  prices,
  elemental_index(
    rel, period, ea,
    fw(rel, group = interaction(period, ea)),
    r = 1
  )
)