Stochastic Approach To Index Numbers For Multilateral Price Comparisons And Their Standard Errors
The main objective of the paper is to demonstrate that a number of widely used multilateral index numbers for international comparisons of purchasing power parities (PPPs) and real incomes can be derived using the stochastic approach. The paper shows that price index numbers from commonly used methods like the Iklé, the Rao-weighted, and an additive multilateral system are all estimators of the parameters of the country-product-dummy (CPD) model. 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 under different stochastic specifications for the disturbance term. Estimates of PPPs and their standard errors for OECD countries using the proposed methods are presented. The paper also outlines a method of moments approach to the estimation of PPPs under the stochastic approach. The paper shows how the Geary-Khamis system of multilateral index numbers is a method of moments estimator of the parameters of the CPD model. The paper therefore provides a coherent stochastic framework for the Geary-Khamis system and derives standard errors of the Geary-Khamis PPPs. Copyright 2010 The Authors. Journal compilation International Association for Research in Income and Wealth 2010.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 56 (2010)
Issue (Month): s1 (06)
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=0034-6586|
More information through EDIRC
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=0034-6586|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- D.S. Prasada Rao, 2004. "The Country-Product-Dummy Method: A Stochastic Approach to the Computation of Purchasing Power Parities in the ICP," CEPA Working Papers Series WP032004, School of Economics, University of Queensland, Australia.
- D. S. Prasada Rao, 2005. "On The Equivalence Of Weighted Country-Product-Dummy (Cpd) Method And The Rao-System For Multilateral Price Comparisons," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 51(4), pages 571-580, December.
- Erwin Diewert, 2005. "Weighted Country Product Dummy Variable Regressions And Index Number Formulae," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 51(4), pages 561-570, December.
- Cameron,A. Colin & Trivedi,Pravin K., 2005. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9780521848053, December.
When requesting a correction, please mention this item's handle: RePEc:bla:revinw:v:56:y:2010:i:s1:p:s32-s58. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.