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TIME REVERSAL TEST

Statistics Directorate    
French Equivalent: Test de réversibilité dans le temps

Definition:
A test that may be used under the axiomatic approach which requires that if the prices and quantities in the two periods being compared are interchanged the resulting price index is the reciprocal of the original price index.

When an index satisfies this test, the same result is obtained whether the direction of change is measured forwards in time from the first to the second period or backwards from the second to the first period.

Context:
The time reversal test requires that the index for the later period based on the earlier period should be the reciprocal of that for the earlier period based on the later period; one of the desirable features of the “Fisher Ideal” price and volume indexes is that they satisfy this test (unlike either the Paasche or Laspeyres indexes) (SNA 16.24. Available at http://esa.un.org/unsd/sna1993/introduction.asp).

Source Publication:
ILO, IMF, OECD, Eurostat, UNECE, World Bank, 2004, Producer Price Index Manual: Theory and Practice, International Monetary Fund, Washington DC.

Cross References:
Fisher’s Ideal Index (price)
Fisher’s Ideal Index (volume)
Laspeyres price index
Laspeyres volume index
Paasche price index
Paasche volume index

Hyperlink:
http://www.imf.org/external/np/sta/tegppi/index.htm

Statistical Theme: Prices and purchasing power partities

Created on Tuesday, September 25, 2001

Last updated on Monday, July 11, 2005