IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

A Constrained State-Space Approach to the Prediction of Comparable Real Income Across Countries

Listed author(s):
  • D.S.P Rao
  • Rambaldi
  • A.N.

Studies on growth performance and catch-up and convergence of countries require and make extensive use of internationally and temporally comparable data on real gross domestic product (GDP) expressed in a common currency unit. The International Comparison Program (ICP), a project supported by the World Bank, OECD and a host of other international bodies, provides estimates of purchasing power parities (PPPs) as the most robust and appropriate converter of nominal GDP into a common currency unit reflecting differences in levels of prices of goods and services in different countries. The coverage of the ICP, however, has been limited to a few benchmark years, roughly every five years since 1970, and to only those countries participating in benchmark comparisons. Over the last two decades, the Penn World Tables (PWT) filled this gap by providing extensive tabulations of real GDP data for a large number of countries and for a 50-year period covering both participating and non-participating countries and benchmark and non-benchmark years. The PWT figures are essentially extrapolations based on results from benchmark years and country-specific growth rates with particular emphasis on comparisons from specific benchmark years. The main purpose of the paper is to show how a constrained state-space formulation of the problem can be used to generate PPPs, and real GDP data, that is consistent with data generated by the ICP for the benchmark years. Treating the ICP data as an unbalanced panel, the paper presents a suitable spatially autocorrelated econometric model for PPPs which is reformulated as a constrained state-space form to complete the panel. The empirical illustration focuses on 24 OECD countries from 1971 to 2000 and generates a complete set of predicted PPPs for all the countries and years. Unlike the PWTs figures, it is possible to compute standard errors associated with the predicted figures

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.

File URL:
File Function: main text
Download Restriction: no

Paper provided by Econometric Society in its series Econometric Society 2004 Australasian Meetings with number 154.

in new window

Date of creation: 11 Aug 2004
Handle: RePEc:ecm:ausm04:154
Contact details of provider: Phone: 1 212 998 3820
Fax: 1 212 995 4487
Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ecm:ausm04:154. 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: (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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.