inflation

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    IMPLAN Support
    Hi Janet, If you are using spending patterns (rather than a single Industry Change Activity), we would have expected the output GDP to vary across the various expenditure categories, as opposed to the single 3% value. Could you confirm whether or not you are working with a single Event or multiple Events? Also, you'll want to be sure that you are viewing the results for both Scenarios in the same Dollar Year for View in order to be able to properly compare them. In other words, regardless of what Event Year you used, you will want to use the same Dollar Year for View when viewing/comparing the results. Let us know if you have any further questions.
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    jclements
    I am using an industry change activity but have multiple events (with spending events starting in 2014 and going through 2030). Also, I have everything in the same dollar year view (2013). So, should I be entering the 3% inflation rate? It seems that I should because when I compare the two alternatives not taking into account timing (i.e., making the event year 2013 for all events). Alternative 1 has a greater impact. However, when I take into account timing, and enter different event years based on the timing of implementation, alternative 1 has a lower impact.
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    jclements
    Also, if I am using the 3% inflation, should I also be using the GDP deflator? I was assuming the deflator served as a discount rate of sorts.
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    IMPLAN Support
    Hi Janet, If you were to do the inflation yourself, you would need to apply the Output deflator to the Industry Sales value and the GDP deflator to the Labor Income values (Employee Compensation and Proprietor Income). The GDP deflator does not represent the discount rate; it is analogous to the Output deflator but applies to Labor Income only. We have separate Output deflators because the values of various commodities change at different rates over time - i.e., $4 might buy you a gallon of milk in 2012 but you'll need $5 for a gallon of milk in 2015 (price of milk increases over time), whereas $500 might buy you an iPhone 5 in 2012 but $300 will buy you an iPhone 5 in 2015 (price of electronics often fall over time). Having different deflators for different commodities accounts for these differences. On the other hand, the price of labor changes at similar rates across different industries, so we just have one GDP deflator. You should get nearly identical results if you: a) apply the appropriate deflators to your 2012 values and set the Event Year to whatever year's deflators you used or b) leave your value alone (no deflators) and set the Event Year to 2012. Also, as a reminder, the Event Year needs to be set prior to entering any dollar values in order for the appropriate deflation calculation to be applied. Please let us know if you have any further questions.
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    jclements
    I thought the deflators were automatically applied, no? When you say apply - does that mean if there is a value in IMPLAN then the deflator is applied? Just to recap, If I apply the inflation rate then I should use the deflators. I am importing an activity template so does that mean that the event year is entered prior to the dollar value or do I need to hand enter everything? Also, I don't get identical results when I run scenarios a and b above.
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    jclements
    Also, is there someone I could just talk to about this on Monday morning? Thanks,
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    IMPLAN Support
    Hi Janet, When you select an Event Year that is different from the year of your IMPLAN data, the software automatically applies the appropriate deflators for you. However, when we said to “apply the appropriate deflators to your 2012 values” in part a above, we were talking about manually applying the deflators outside of IMPLAN – we said this because this statement in your initial post indicated that that is what you were doing: “Before entering the spending inputs into the model, I applied an inflation rate of 3% to escalate to the event year(all of my original spending data was in 2012 USD)” If that is not what you meant, could you please describe in more detail exactly what you meant? If you could also describe what type of activity this is (e.g., Institution Spending Pattern) that would be quite helpful on our end. You can apply your own deflators manually (outside of IMPLAN) or let IMPLAN do it for you – what matters is that you tell IMPLAN what dollar year your values represent. So if you inflated them to 2015 (outside of IMPLAN), then you need to set the Event year to 2015 so that IMPLAN knows that they are 2015 dollars. If you do not inflate the values (i.e., if they are 2012 dollars), then you need to set Event Year to 2012. Then you can view the results in whatever Dollar Year for View you’d like. Unless you have different deflators you’d like to use, we’d recommend simply letting IMPLAN do the deflating/inflating for you. The template should have a field for Event Year – if you specify the year in that field then that counts as setting the year prior to entering the values – i.e., you can import with no need to enter by hand. Great question. Please let us know if you have any further questions. We are a bit short staffed for the week due to our monthly training.
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    jclements
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    jclements
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    jclements
    Rereading your answers, I keep coming up with different interpretations. Is there someone available to speak with about this? My events occur over multiple years so it is not just a matter of setting the event year view. Thanks, Janet
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    jclements
    As a final question, based on the answers above, and reading the IMPLAN manual. This is what I think I should be doing. Please confirm: I have a baseline spending of $616 million over 35 years. This is in $2012 USD and has not been adjusted to reflect the fact that you will need to spend more money in the future to get the same result. When escalated to reflect decreased value of money in the future and the timeline of spending(using a 3% inflation rate)the total spending amount is $846 million. This is divided over different sectors over different years. So when I am entering into IMPLAN, I would use the $846 million amount (i.e., the escalated amount) and indicate the event year that the money is spent in. FOr example, if $100 million of the total $846 was spent in 2017 (the $100 million having been escalated to 2017 values), I would enter the event year as 2017, and the appropriate IMPLAN output and GDP deflators would be applied to bring the dollar value back to the dollar year view. So, even if I used the escalated number to reflect the decrased value of money in the future, I would not change the output or labor deflators to 0. Please confirm this is correct. Thank you, Janet
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    IMPLAN Support
    Hi Janet, IMPLAN has built in deflators to account for the effects of inflation. You do not need to adjust your dollar amount outside the model. All you need to do when setting up the event is to set the "Event Year" to the appropriate year, then run your activity. When you view your results check that the "Year for View" is set to the appropriate year that you want to report the results. If you need to report results in separate years, then I would consider running separate activities/scenarios for the spending that occurs in each year so that your "Event Year" and "Year for View" (in the results section) match up for each year of spending. If you prefer, you can apply your own deflator values outside the model, but if you do so then you need to ensure that both your "Event Year" and "Year for View" are set to the year of the Data model (2011 in this case) so that you are not double inflating your results. I hope this helps.
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    jclements
    Ok. I'm still a little confused because everything I have been reading in the manual indicates that I should be entering the dollar value of the event year. For example, in 2017, I know that I am going to spend $100 million in sector 388. In 2012 this would be about $86 million. SO you are saying I should enter $86 million and set the event year to 2017, rather than entering $100 million and setting the event year at 2017.
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    jclements
    For Example, this tutorial (attached, Developed by IMPLAN) says to input the value of the money spent in 2006 and enter the event year as 2006 and that the deflators will bring it back to the year of the model.
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    jclements
    This appendix to an IMPLAN also says you can enter the dollar amount in the value of the event year (i.e., if you are going to spend $100 million in 2015, which would be $86 million in 2012 dollars, you can enter $100 million as long as you enter the event year as 2015).
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    IMPLAN Support
    Hello Janet, Your manual is correct. If you know how much you will be spending in a certain year, then simply enter that amount in the event and adjust the event year accordingly. To use your example, if you know that you will be spending $100 million in 2017, then enter $100 million in the event and adjust the event year to 2017. Repeat this procedure for each of your events. The model will then make the inflation adjustment for you once you run your scenarios. After you have your results, simply adjust the Year for View menu on the results screen to the year you want to use to report your results. For example, if you want to report results in 2013 dollars then adjust Year for View to 2013. Let us know if you have any further questions.

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