Suppose I have a monthly data on inflation with base year 1993-94 from April 1994-2010 and other data set is from January 2005 to November 2014. Now I want to convert the the whole data on the same base year 2004-05. Please tell me how I can do that.
Dear Ahmad,
Proceed as follows:
- Step 1: having indices for elementary price (Pt / P1993-4) and (Pt '/ P2004-5).
- Have the weightings of the year 2004-5 : Wi(2004-5) (weight of each item of expenditure in the total expenditure) .
- Step 2: Choose from first base, the index : P2004-5 / P1993-4
- Step 3: Express first base at 2004-5 prices by multiplying the elementary indices of the first base by P1993-4 / P2004-5 (reverse of P2004-5 / P1993-4)
- Step 4: Multiply indices determined in the previous step by Wi (2004-5).
Best Regards
Make use of statistical indices, these they allow you to convert data basing on a single base year. There are different types of indices depending on the nature of data. You can get more by reading Introduction to Econometrics by Damodar N. Gujarati. There are linear and non-linear indices, but for your case am sure its linear comprising of weighted indices.
Hi, if you have inflation number I think you need not to worry if they are from indices with different bases. However, in case you have price indices with different base year (only different base years ... here it is assumed that the underlying basket would be the same in two base periods. Now you should have at least one point in common. Like if one series is with base July 1991 and continues till June 2000. Other series starts with base July 2000 and continues till December 2014 I think there is no proper way to convert these two series into one base series. YES, if data for the later series is available say from June 2000 then we call it that we have one point in time for both the series. Here that point in time is June 2000 for which we have price index for both the base period. Now divide 'June 2000 index of later base' with the 'June 2000 index of former base'. You will get a factor to convert previous series into later base series by simply multiplying the previous series with this factor. You can see the attached excel file.
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