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Towards a simplified approach to international price comparisons: A case for the Multilateral Walsh Index

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  • Abe, Naohito
  • Rao, D.S. Prasada

Abstract

We offer a simple alternative to the Gini-Eltetö-Köves-Szulc and Geary-Khamis methods used for international price and real expenditure comparisons. We show that the only symmetric average fixed basket price index that satisfies transitivity, country symmetry, and invariance to proportional changes in quantities is the multilateral Walsh index, a generalization of the superlative bilateral Walsh index (Diewert, 2001). Simplicity and its superior axiomatic properties, including identity and monotonicity, compared to current International Comparison Program (ICP) and Penn World Table (PWT) methods and plausibility and comparability of results based on the 2017 ICP data make the multilateral Walsh method an ideal choice.

Suggested Citation

  • Abe, Naohito & Rao, D.S. Prasada, 2022. "Towards a simplified approach to international price comparisons: A case for the Multilateral Walsh Index," RCESR Discussion Paper Series DP22-1, Research Center for Economic and Social Risks, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:rcesrs:dp22-1
    Note: 25 February, 2022
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    References listed on IDEAS

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    More about this item

    Keywords

    Price comparisons; Transitivity; Proportionality; Real expenditures;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation

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