Double Deflation

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Definition

Double Deflation refers to a two-step process by which Intermediate Input, Final Demand, and Total Output valued at current prices in the accounting period are “deflated” by using commodity price indices (CPI) and subsequently deriving a value added price index that enforces the fundamental identity that the value of total outputs must always be equal to the value of total inputs. ^[1]

Issues and Challenges

If deflators for intermediate inputs and/or gross output are not perfect, however, deflated value added figures will be distorted.

References

Eurostat SUT Manual

↑ R.E. Miller and P.D. Blair, Input-Output Analysis: Foundations and Extensions, Second Edition, Cambridge University Press, 2009

[1] R.E. Miller and P.D. Blair, Input-Output Analysis: Foundations and Extensions, Second Edition, Cambridge University Press, 2009

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