The Index-number Problem and Its Solution

Index numbers of price and quantity play an important role in the index-linking of government loans. The object of this study is to ascertain what formulae should be used in the construction of new index numbers to replace those known to produce biased measures of price and volume change.

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Index numbers of price and quantity such as the retail price index, the index of industrial production and the indices to be found in national accounts publications have increased in importance since the mid-1900s. They affect wage negotiations, are used in econometric models that assist in forecasting and economic policy making and lately have begun to play a role in the index-linking of government loans and rent agreements. It is the object of this study to ascertain what kind of formulae should ideally be used in the construction of those index numbers which may eventually replace ones in current use known to produce biased measures of price and volume change, bearing in mind the purposes these index numbers are designed to serve and the limitations set by data availability. G.Stuvel is also the author of "The Exchange Stability Problem", "Systems of Social Accounts" and "National Accounts Analysis".