Scandinavian Working Papers in Economics

Discussion Paper Series in Economics,
Norwegian School of Economics, Department of Economics

No 5/2014: Challenges for the construction of historical price indices: The case of Norway, 1777-1920.

Jan Tore Klovland ()
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Jan Tore Klovland: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway

Abstract: This paper reviews some methodological and practical problems encountered in the construction of historical price indices. The underlying data sets in such studies are often characterized by heterogenous and incomplete price series. It is shown that by using the repeat sales method for constructing the subindices for individual commodity groups some of the main problems can be overcome. The procedures are illustrated by material from the construction of monthly price indices for Norway from the year 1777 to 1920. The price indices shed new light on two great wartime in ationary episodes in Norway: 1807-1817 and 1913-1920. In spite of a 61-fold increase in the price level in the rst period and a 4-fold increase in the second, it is found that, after in ation had been brought under control, prices reverted to a level consistent with the purchasing power parity principle.

Keywords: Price index; price history; purchasing power parity.

JEL-codes: E31; N13; N14

34 pages, March 5, 2014

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