Input-Output Based Measures of Underlying Domestic Inflation: Empirical Evidence from Denmark 1903-2002

The paper presents input-output based time-series data for the underlying domestic inflation in Denmark 1903-2002 and analyses the inflationary development during the last century. More conceptual issues in relation to the interpretation and use of input-output based domestic inflation measures are also discussed. The purpose of such inflation measures is to track the development in the domestic market-determined inflation, which is closely related to the price of gross value added in the domestic market-based private business sector. A price index for value added often displays a different short-term development than the headline CPI. Such differences can be useful in an assessment of the current inflationary environment and in relation to an interpretation of the historical inflation development.