Change of Base Year and Chain-Linking

It is convenient to start by considering the example of a time series of Laspeyre price indices with a fixed base period. In the course of time, the weights – e.g., the expenditure or production pattern – tends to become progressively less relevant to the situations of later periods. At one point, it becomes unacceptable – and new weights will be introduced, changing base period. When the base period ( the weights ) changes, the old and the new series will have to be chain linked in order to have a consistent time-series.

Linking indices is a simple arithmetic procedure, with the purpose of keeping the growth rates. Linking procedure; see example below.