On Some Fundamental Provisions of the Price Index Theory

Abstract

The author of the article considers and comments on the most important postulates of price statistics and international comparisons of GDP by purchasing power parities, the methodology of which is  presented in publications of international organizations. The  postulates relate to formulae of indices, substitution effect and tests  of axiomatic theory of index numbers. It is noted that some  distinguished experts in price statistics point out the incompatibility  of certain postulates; nevertheless, the above-mentioned postulates  underline the widely used methods of computation of indicators of  price statistics and purchasing power parities and understanding of  the nature of the postulates is essential in the context of analysis of  statistical indicators as well as in the context of ongoing discussion  of index number theory and purchasing power parities. Special  attention is paid to discussion of advantages and limitations of  different formulae of multilateral comparisons of GDP by purchasing power parities. In particular various tests on axiomatic  theory of indices which these formulae satisfy are considered.