Adaptation of Swiss price indices to Liechtenstein’s economic structure

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Aggregates measured in money - i.e. nominal quantities (e.g. nominal GDP) - can change for various reasons. On the one hand, because quantities, for example of goods and services, change. On the other hand, however, also because of price changes. Since prices change over time (they usually rise in the long run), the price effect is estimated and removed in order to obtain real variables; especially when making comparisons over a longer period of time. This is because, in many cases, economic analysis is primarily interested in the quantity effect. Since no price indices are published for Liechtenstein, Swiss price indices such as the consumer price index or the GDP deflator are usually used for price adjustments. This approach is justified because Liechtenstein is part of the Swiss currency and customs area, some taxes and import duties that affect prices are levied jointly (e.g. value added tax) and because the living standards, the level of economic development and the economic structure are similar in both countries. It can be assumed that the difference in the price development between Liechtenstein and Switzerland is similar to that between individual Swiss cantons (for which no separate price indices are collected). However, a better adjustment to Liechtenstein's circumstances can be achieved by reweighting the Swiss industry sub-indices. In the project, this will be done on an exploratory basis for the export and import price indices on a monthly basis and for the GDP deflator on a quarterly basis.

If the test phase will be successfully completed, the adapted price indices will be updated on a quarterly basis, integrated into the Applied Economic Analysis database and made available to the public via the data pool.

Collaboriation: Lukas Hasler

Project start: October 2022