Deflatori

Deflatori are price indices used in economics to remove the effects of price changes from nominal measures of economic activity, yielding real values. They allow comparisons of economic quantities over time by separating changes in quantity from changes in prices. The term is commonly used for indices that convert nominal GDP, consumption, investment, and other aggregates into real terms.

The most widely cited deflator is the GDP deflator, which covers all final goods and services in a country’s gross domestic product. Real GDP is obtained by dividing nominal GDP by the GDP deflator (and scaling appropriately), so the deflator reflects changes in both prices and the composition of GDP. Other important deflators include the deflator for personal consumption expenditures (PCE deflator) and, in many contexts, the consumer price index (CPI) used as a deflator for consumer purchases. Countries also publish deflators for government spending, investment, and net exports. The deflator is typically defined as Deflator = (Nominal value / Real value) × 100, with 100 representing the base year.

Differences among deflators arise because they measure price changes for different baskets of goods and services. The GDP deflator is broad and allocates price changes across all sectors, while the CPI and PCE deflator reflect consumer expenditures with distinct baskets and weights. As a result, growth rates and inflation estimates can vary across deflators, even for the same period.

Limitations include base-year selection, substitutions in consumer behavior, changes in product quality, and the introduction of new goods. While deflators are essential for assessing real growth and price levels, they should be interpreted in the context of the specific basket and methodology used.