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A Chain-Type Price Index for New Business Jet Aircraft

A Chain-Type Price Index for New Business Jet Aircraft Abstract This paper presents a price index constructed to measure the real price and real output of corporate business jet aircraft. It employs a chained price index methodology to properly account for the effect of changes in aircraft quality and product lines on the price index. The index indicates that the average price level of corporate jets has significantly outpaced the general price level measured by the GDP deflator, nearly doubling the real price of the product over a 35-year period from 1968 to 2003, which could have negatively affected the demand for the product. Because the GDP deflator significantly understates the price increase in corporate jets, the industry's real output is overstated when its nominal sales are deflated with a general price index. The paper suggests that an industry-specific price index allows more accurate analyses of real economic activity of an industry. The methodology used in this paper could be useful for other industries where product price movements vary significantly from the changes in the general price level. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Business Economics Springer Journals

A Chain-Type Price Index for New Business Jet Aircraft

Cho, Dong W
Business Economics , Volume 41 (1): 8 – Jan 1, 2006
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References (12)

Publisher
Springer Journals
Copyright
2006 National Association for Business Economics
ISSN
0007-666X
eISSN
1554-432X
DOI
10.2145/20060106
Publisher site
See Article on Publisher Site

Abstract

Abstract This paper presents a price index constructed to measure the real price and real output of corporate business jet aircraft. It employs a chained price index methodology to properly account for the effect of changes in aircraft quality and product lines on the price index. The index indicates that the average price level of corporate jets has significantly outpaced the general price level measured by the GDP deflator, nearly doubling the real price of the product over a 35-year period from 1968 to 2003, which could have negatively affected the demand for the product. Because the GDP deflator significantly understates the price increase in corporate jets, the industry's real output is overstated when its nominal sales are deflated with a general price index. The paper suggests that an industry-specific price index allows more accurate analyses of real economic activity of an industry. The methodology used in this paper could be useful for other industries where product price movements vary significantly from the changes in the general price level.

Journal

Business Economics – Springer Journals

Published: Jan 1, 2006

Keywords: economics, general; political economy/economic systems; business and management, general

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