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What is the difference between current and constant price series?

Data reported in current (or “nominal”) prices for each year are measured in the prices for that particular year. For example, current price estimates shown for 1990 are based on 1990 prices, for 2000 are based on 2000 prices, and so on. The World Development Indicators (WDI) alternatively present time series in constant (or "real") terms. Constant price series show the data for each year in the prices of a chosen reference year. For example, data reported in constant 2010 prices show data for 1990, 2000, and all other years in 2010 prices.

Current price series are influenced by the effects of inflation. Constant price series are used to measure the true volume growth, i.e. adjusting for the effects of price inflation. For example (using year one as the reference year), suppose nominal Gross Domestic Product (GDP) rises from 100 billion to 110 billion, and inflation is about 4%. Measured at constant prices, the second year GDP level would be approximately 106 billion, reflecting volume growth of 6%.

Except for rare instances of deflation (i.e. negative inflation), a country's current price estimates expressed in local currency will be higher than those at constant prices in the years following the reference year. However, this relationship does not hold when data are converted to a common currency such as U.S. dollars. Countries may have large devaluations of their currency, which can cause the current dollar series to be lower than the constant dollar series.

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