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Regionalization and its Implications for Price Index Construction: The Case of the International Comparisons Program

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  • Robert J. Hill

    ()
    (School of Economics, The University of New South Wales)

  • T. Peter Hill

    ()
    (Economic Statistics and National Accounts, OECD)

Abstract

The International Comparisons Program (ICP) compares the purchasing power of currencies through a series of regional comparisons that are then linked together to obtain results at the global level. This process of regionalization complicates the construction of price indexes by essentially forcing the adoption of a two-stage approach. In previous rounds of ICP, data constraints have largely determined how the regions are linked. These data constraints, however, are largely absent in ICP 2005. This raises the question of how best to extend existing price index formulas to cope with the regionalization process that underpins ICP 2005. This paper attempts to answer this question, while at the same time imposing some structure on the existing literature on two-stage methods.

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Bibliographic Info

Paper provided by School of Economics, The University of New South Wales in its series Discussion Papers with number 2007-28.

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Length: 33 pages
Date of creation: Aug 2007
Date of revision:
Handle: RePEc:swe:wpaper:2007-28

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Keywords: ICP; Linking Regions; Fixity; Purchasing Power Comparisons; Price Index; Chaining;

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  1. Dowrick, Steve & Quiggin, John, 1997. "True Measures of GDP and Convergence," American Economic Review, American Economic Association, vol. 87(1), pages 41-64, March.
  2. J. Peter Neary, 2004. "Rationalizing the Penn World Table: True Multilateral Indices for International Comparisons of Real Income," American Economic Review, American Economic Association, vol. 94(5), pages 1411-1428, December.
  3. Neary, J Peter, 2000. "True Multilateral Indexes for International Comparisons of Real Income: Theory and Empirics," CEPR Discussion Papers 2590, C.E.P.R. Discussion Papers.
  4. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584.
  5. Summers, Robert, 1973. "International Price Comparisons Based Upon Incomplete Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 19(1), pages 1-16, March.
  6. Hill, Robert J., 2000. "Measuring substitution bias in international comparisons based on additive purchasing power parity methods," European Economic Review, Elsevier, vol. 44(1), pages 145-162, January.
  7. Bhagwati, Jagdish N, 1984. "Why Are Services Cheaper in the Poor Countries?," Economic Journal, Royal Economic Society, vol. 94(374), pages 279-86, June.
  8. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
  9. Hill, Robert J, 1997. "A Taxonomy of Multilateral Methods for Making International Comparisons of Prices and Quantities," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 43(1), pages 49-69, March.
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Cited by:
  1. Ward, Michael & Palanyandy, Chellam & Capilit, Eileen, 2008. "Integration of Consumer Price Indices and the International Comparison Program for the Asia and Pacific Region: How can They be Achieved?," ADB Economics Working Paper Series 143, Asian Development Bank.

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