<p>The advantage of chain linking is that component weightings drift away from their weight in nominal GDP as the reference period recedes.</p>

<p>This is a St. Louis Fed document on the methodology: <a href="https://www.stlouisfed.org/publications/regional-economist/january-1996/chained-rested-and-ready-the-new-and-improved-gdp" rel="nofollow noreferrer">link to website.</a></p>

<p>I am not familiar enough with the details to summarise it better than that document.</p>

CC BY-SA 4.0
2020-04-20T02:20:19.393Z
2020-04-20T02:20:19.393Z
Brian Romanchuk
<p>Some variables in economics like GDP are computed in chain-linked prices or constant prices.</p>

<p>What are advantages of chain-linked prices vs constant prices?</p>

<p>Thank you</p>

CC BY-SA 4.0
2020-04-18T11:16:06.137Z
A constant price CPI exists? Where?
Brian Romanchuk
CC BY-SA 4.0
2020-04-19T04:07:51.720Z
Ok. Maybe I made a mistake about constant CPI. What are advantages of chain-linked prices vs constant prices for economic variables like GDP? Thanks!
user72728
CC BY-SA 4.0
2020-04-19T19:27:47.947Z
I adjusted the question to just list GDP to avoid issues. I think the answer is to find a methodology description of chain linking, as it would probably explain. My understanding is that the advantage of chain linking is that you are constantly updating the deflator to match current conditions, while constant prices face big jumps as the year moves away from the base year. If nobody answers soon, I will try to find a reference.
Brian Romanchuk
<gdp>
What are the advantage of chain-linked prices over constant prices?
user72728
# What are the advantage of chain-linked prices over constant prices?

(Asked by: username_0 on 2020-04-18)

Some variables in economics like GDP are computed in chain-linked prices or constant prices.

What are advantages of chain-linked prices vs constant prices?

Thank you

**Tags:** gdp
> **Comments:**
> **username_1**: A constant price CPI exists? Where?  
> **username_0**: Ok. Maybe I made a mistake about constant CPI. What are advantages of chain-linked prices vs constant prices for economic variables like GDP? Thanks!  
> **username_1**: I adjusted the question to just list GDP to avoid issues. I think the answer is to find a methodology description of chain linking, as it would probably explain. My understanding is that the advantage of chain linking is that you are constantly updating the deflator to match current conditions, while constant prices face big jumps as the year moves away from the base year. If nobody answers soon, I will try to find a reference.  

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## 1 answers

### Answer by username_1 on 2020-04-20. Score: 1

The advantage of chain linking is that component weightings drift away from their weight in nominal GDP as the reference period recedes.

This is a St. Louis Fed document on the methodology: [link to website.](https://www.stlouisfed.org/publications/regional-economist/january-1996/chained-rested-and-ready-the-new-and-improved-gdp)

I am not familiar enough with the details to summarise it better than that document.


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