Discussion of Global Relative Price Shocks: The Role of Macroeconomic Policies (original) (raw)

2010, Research Papers in Economics

The key feature of the pit is that they are bounded below by 0 and above by 1. Thus we are guaranteed that all moments of (p1t, ..., pIt) exist for all data-generating processes for the nominal price vector (P1t, ..., PIt), something that is not true of (q1t, ..., qIt). This means that one can use moments to summarise the features of (p1t, ..., pIt), something that we cannot be assured is valid when summarising the features of (q1t, ..., qIt). A second important difference between Definitions (1) and (2) is that the former depends on the choice of numerator while the latter does not. This means that summary statistics built on Definition (1) will depend on the choice of numerator.

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