Additivity of national accounts reconsidered

Abstract

It is well known that the use of chained indices in economic accounting systems leads to volume figures (deflated nominal values) that are inherently non-additive. This inconvenience for users is caused by a mathematical impossibility result. Recognizing this state of affairs, in this article a deflation method will be developed that uses chained indices of a certain functional form but leads to volume figures that exhibit additivity and can be nicely interpreted.