On the Factorial Approach Multilateral Index Number System Satisfying base Invariance and Consistency

Abstract

ABSTRACT:

The factorial approach multilateral index number system (FMS), as it is, is not base invariant and consistent. It is indicated in this paper how the FMS can be made to meet these requirements by way of a logarithmic transformation. The transformation leads to new multilateral index number formulae for price and quantity, which are found to be simple in form and which satisfy the basic axioms and the important tests. The new formulae are fully derived and illustrated, and the indices compared with those from some other systems.