Low base effect

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As a base effect, the effect is referred to in economics and official statistics, when with increasing absolute size high percentage increases are always difficult. Sometimes you also referred to the impression of a high rise, only a small underlying is owed but, as the base effect. The base effect is of particular importance in the interpretation of rates of change over the previous period. The level of inflation in a given year depends not only on the current price development, but also on the price level of the previous year.

For example, an increase of 100 percent, starting from the value 1 to the new value 2 appears quite impressive. There is a doubling. Here, the base effect is noticeable, since the absolute increase is only 1. Starting from a value of 2 would mean an increase of the same absolute height, so plus 1 to 3 then, only mean an increase of 50 percent. An increase of 3 to 4 corresponds to only 25 percent. An increase is also 1 from 100 to 101 then corresponds to only one percent. Thus we see that the percentage increase in same absolute increments with increasing base value ( hence the name base effect ) is always lower.

In economics, the base effect plays a role in post-crisis, for example, an economy or a company. If, for example, the economic performance of an economy on the ground, meet for the first time periods of a new upswing low absolute increases for a large increase in percent.

In statistics, a base effect has a dampening effect on inflation: If, after strong price increases approximately in energy and food prices observed comparatively high, all this as a new comparison values ​​in the calculation of the current annual inflation rate. This annual inflation falls by the base effect then lower than in the period before.

In periods of economic downturn, a low inflation rate is often determined by the leading economic research institutes. This should cause no worry because the effects can be quite positive. Often the inflation is due to the oil price. Here again it should be noted, the base effect: It displays the current rise in oil prices is compared with the change in price the same period of last year. Had the price of oil last year after application, it may happen that the current rise in prices is particularly strong year over year. (1)

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