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Treatment of exports
6.1 As explained in Chapter 3, the scope of the SOP index model includes both exports and imports as well as domestically produced and consumed final goods (i.e. ‘Final goods—Domestic— Consumption plus Capital’, in diagram 1). This approximates the national accounts concept of National turnover (of goods).
6.4 Therefore, analyses focusing on, say, assessing price transmission effects between Stage 2 goods, Stage 3 goods exclusive of exports (Gross national expenditure) and DFP (see diagram 2) could give misleading signals. The reason is that Stage 2 will include goods that are destined to be inputs to the production of Stage 3 goods for export. Such export prices do not directly impact on domestic inflation and should be excluded for this analysis.
6.5 Similarly, the Stage 1 goods aggregates include those destined for the production of Stage 2 goods that subsequently flow into the production of Stage 3 goods for export.
6.6 Users’ views are requested on whether the model should be further complicated through the calculation of indexes for subsets of the Stage 2 and Stage 1 aggregates which exclude flows relating to the production of goods for export. 6.7 No assessment has yet been made as to the feasibility or desirability of such an elaboration. The practical reality is that it may be necessary to make a choice between an index model that completely excludes, or completely includes, transactions associated with exports.
Number of stages
6.8 In Chapter 2, it is stated that aggregating data relating to all the non-final commodities would result in multiple counting of transactions. Therefore, under the SOP model developed in this paper, the non-final commodities have been split between two stages, resulting in a total of three stages.