Description
In reviewing economic data it is often useful to report the average growth rate for a series of values occurring periodically (weekly, monthly, annually). Average growth, a measure of central tendency, represents a value that describes the mean growth rate for a set of data. As values accumulate and trends emerge through time, a question frequently arises: what is the average growth rate of the variable in the series for a selected period? A preliminary response to this first question is another question: what average is reported, the arithmetic growth rate or the geometric growth rate? This response, in turn, gives rise to a third question: does it matter which average growth rate is reported? Furthermore, given that there is a choice, is one preferable? Which growth rate best characterizes the changes experienced in the series if the two average growth rates are found to be different? This brief technical note suggests answers to the questions posed.
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