Reconstructing Aggregate Euro‐zone Data

Abstract

Reconstructing historical euro‐zone data by aggregation across individual countries is problematic because of past exchange rate changes. The approach here avoids such distortions, yet aggregates exactly when exchange rates are fixed. This is achieved by aggregating weighted within‐country growth rates to obtain euro‐zone growth rates, then cumulating this euro‐zone growth rate to obtain aggregate levels. The aggregate implicit deflator then coincides with the implicit deflator of the aggregate nominal and real data. Sub‐aggregates also aggregate correctly, both regionally and temporally, as well as, e.g., monetary sub‐aggregates. The resulting euro‐zone data over the previous two decades are compared with other approaches.