Given Iran’s fast changing economic conditions, the reference period must be updated faster than other economies to obtain reliable index numbers, he added.
The Central Bank of Iran would normally change the base year every 10 years.
The base year was first introduced in the fiscal 1936-37 and then updated in 1959-60, 1969-70, 1974-75, 1990-91, 1997-98, 2004-5 and 2011-12. However, SCI used a different base year, which resulted in significant differences in the sets of figures, including those on Consumer Price Index and economic growth the two statistical bodies were producing.
The government required them to employ a single base year for their calculation, which has been 2016-17 thus far, the Persian-language daily Shargh reported.
Noting that the base year has to be revised periodically to reflect the structural changes taking place in an economy, Rezaei said, “A five-year gap between two base years is the shortest gap that could be employed because the process through which a base year is selected takes at least three years. Plus, you cannot choose any year as a base year; it must be a representative year with a minimum of economic stability. It must not see any abnormal incident or drastic change in macroeconomic variables.”
A base year is the first of a series of years in an economic or financial index. It is typically set to an arbitrary level of 100. New, up-to-date base years are periodically introduced for comparison in the measure of a business activity or economic index.
The base year can also describe the starting point from a point of growth or a baseline for calculating same-store sales. For example, a price index measures the change in value of a fixed basket of goods and services over time. The Consumer Price Index reflects the cost of living of consumers.
According to Ayyub Faramarzi, the deputy head of SCI, the current series of index numbers has 457 items and 360,000 quoted prices derived from retailers of 231 cities and 626 villages on a monthly basis.
The price relative for each quotation is calculated by dividing the current price by the corresponding base year (2016-17) price and multiplying by 100. In fact, the base year is a benchmark with reference to which the national account figures such as gross domestic product, gross capital formation, Consumer Price Index and Producer Price Index are calculated.