The Price Equation
Where; I(t) = f[X(t)]/ CPI(t-1) ; f[X(t)] = A + SUM[B(n)*DX(n,t)**2) + C(n)*DX(n,t) + D(n)*X(n,t-1); n = 1 to 12; DX(n,t) = X(n,t) - X(n,t-1) ; and; n X(n,t) n X(n,t) 1 Cash and Traveler Checks 7 Individual Loans 2 Other Check Deposits 8 Bank Held Gov't Debt 3 Demand Deposits 9 Other Bank Investment 4 Other Loans 10 Savings 5 Comercial Loans 11 FED Held Gov't Debt 6 Real Estate Loan 12 CPI(t-1) A = 6.05138 n B(n) C(n) D(n) 1 2.51695 E-2 -1.25361 E-1 -5.78174 E-2 3 1.42281 E-3 -1.98586 E-2 -3.24311 E-2 4 -1.68230 E-5 4.69220 E-3 8.38236 E-3 5 -1.09016 E-2 5.37921 E-2 1.20801 E-2 6 1.03774 E-2 -1.73130 E-2 9.27001 E-2 7 -2.87952 E-2 9.72792 E-2 -3.10036 E-2 8 -4.78241 E-3 -2.04197 E-3 6.16619 E-2 9 -2.59567 E-3 -4.21779 E-2 7.25378 E-2 10 -1.27912 E-6 -2.17870 E-3 -4.52054 E-3 11 -3.11609 E-2 1.41760 E-1 -6.06438 E-2 12 9.77020 E-2 -2.96417 E-1 -9.30968 E-2 STATISTIIC CPI INFLATION CORRELATION COEFFICIENT 0.999973 0.819696 STANDARD DEVIATION 0.514031 2.40617 E-3 DEGREES OF FREEDOM 109 109 (Data from FRB St. Louis - Dec., 1972 Through Mar, 1985)Return to Index