What is the Fisher formula?
Statistics Canada replaced the Laspeyres formula by the Fisher formula. The Laspeyres method of calculation calculated the real expenditure-based GDP estimate by using the price levels of a base year, and by changing only periodically that base year. As such, for any given year the Laspeyres formula was adding up the volume changes by using the price levels of the base year as weights.This methodology produced very accurate results in periods where all prices were moving at almost the same pace. However, the use of the Laspeyres formula created inaccurate results in periods when prices did not move in a similar fashion. This is what happened, for example, in the 1990s, with the rapid technological expansion of the Information and Communication Technology (ICT) industries. The expansion of those industries has led to a decline in the prices of the equipment and services that they produce, and the Laspeyres volume measure over-estimated the real economic growth in that sector.Given that
