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Abstract:
The Central Bureau of Statistics of the Republic of Croatia publishes composite price indices (producers' price indices of industrial products, by main industrial groupings and NKD 2002 divisions; producers' price indices of agricultural, forestry and fishery products, by groups of products and consumer price indices) and composite quantity indices (indices of agricultural production, industrial production volume indices and volume indices of construction works). Indices are calculated according to the modified Laspeyres formula. This formula is used mainly because of its ease of calculation and comprehension, thus limiting the total cost of constructing statistics. The Zagreb Stock Exchange publishes CROBEX (the official ZSE share index) and CROBIS (the official ZSE bond index).
At least five distinct approaches to index number theory can be distinguished in the literature: 1) the fixed basket approach or the tabular standard, 2) the statistical approach, 3) the test approach, 4) the Divisia index approach and 5) the economic approach.
This paper considers problems in construction, interpretation and use of composite indices. Among the problems in the construction of index number are: definition of the purpose for which the index is being compiled, selection of series for inclusion in index, selection of sources of data, collection of data, selection of base, method of combining data and system of weighting. In addition to these problems in constructing indices, there are several common errors made in interpreting indices: generalization from a specific index, lack of general knowledge regarding published indices, effect of time span on an index and errors in statistical sampling. Numerous problems arise in connection with the use of index numbers for analysis and decision purposes: shifting the base, splicing and quality changes.
Keywords: composite index numbers, price indices, quantity indices
Introduction
Index numbers are often used to measure changes in large sets of data over time. Although there are many different types of indices in both the physical and social sciences, the most publicized indices are used to measure economic activity over time. When an index is used to summarize several items, it is called a composite index because the prices, quantities or values of several chosen items are summed in its computation. If the price, quantity or value of only a single item is followed, such indices...