<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>In this paper, we use index number theory to decompose changes in total interest rate due to changes in the interest rate component and the weight component. We discuss the optimal calculation of a binary index using axiomatic index number theory. Based on this theory we compare alternative indexes and as a result, we choose the Marshall-Edgeworth index because most axioms are satisfied by this index. Comparing the results of binary periods decomposition, we conclude that the differences are not significant when we apply different indices. For multiple period comparison, we suggest using the chain index because it allows accounting for the weights evolution during the whole period. In addition, we derive a formula that could be useful for explaining the differences between chain and direct indexes when we produce multiple period comparison.</p>
</abstract>

In this paper, we use index number theory to decompose changes in total interest rate due to changes in the interest rate component and the weight component. We discuss the optimal calculation of a binary index using axiomatic index number theory. Based on this theory we compare alternative indexes and as a result, we choose the Marshall-Edgeworth index because most axioms are satisfied by this index. Comparing the results of binary periods decomposition, we conclude that the differences are not significant when we apply different indices. For multiple period comparison, we suggest using the chain index because it allows accounting for the weights evolution during the whole period. In addition, we derive a formula that could be useful for explaining the differences between chain and direct indexes when we produce multiple period comparison.

An Application of Index Number Theory to Interest Rates: Evidence from Selected Post-Soviet Countries

Journal of Central Banking Theory and Practice

This work is licensed under the Creative Commons Attribution 4.0 International License.

In this paper, we use index number theory to decompose changes in total interest rate due to changes in the interest rate component and the weight component....

An Application of Index Number Theory to Interest Rates: Evidence from Selected Post-Soviet Countries

Data publikacji: 30 kwi 2022

Zakres stron: 165 - 186

Otrzymano: 14 wrz 2020

Przyjęty: 27 kwi 2021

DOI: https://doi.org/10.2478/jcbtp-2022-0018

Słowa kluczowe
index number, interest rate, chain and direct indexes, post-Soviet countries

© 2022 Karen Poghosyan et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

An Application of Index Number Theory to Interest Rates: Evidence from Selected Post-Soviet Countries

Data publikacji: 30 kwi 2022

Zakres stron: 165 - 186

Otrzymano: 14 wrz 2020

Przyjęty: 27 kwi 2021

DOI: https://doi.org/10.2478/jcbtp-2022-0018

Słowa kluczoweindex number, interest rate, chain and direct indexes, post-Soviet countries

© 2022 Karen Poghosyan et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Słowa kluczowe
index number, interest rate, chain and direct indexes, post-Soviet countries