Systems of Index Numbers for International Price Comparisons Based on the Stochastic Approach
AbstractIn this paper, we introduce a new class of index numbers for international price comparisons. We prove the existence and uniqueness of the new price index. We then propose a stochastic approach to the Ikle (1972) and the new system of index numbers. The advantage of the stochastic approach is that we can derive standard errors for the estimates of the purchasing power parities (PPPs). The PPPs and the parameters of the stochastic model are estimated using a weighted maximum likelihood procedure. Finally we estimate PPPs and their standard errors for OECD countries using the proposed methods.
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Bibliographic InfoPaper provided by School of Economics, University of Queensland, Australia in its series CEPA Working Papers Series with number WP042006.
Date of creation: 2006
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