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Aggregation of Economic Indicators Across Countries; Exchange Rate versus PPP Based GDP Weights

Author

Listed:
  • Marianne Schulze-Gattas
  • Anne Marie Gulde

Abstract

Relative GDP shares are frequently used as weights in aggregations. In order to ensure that these weights reflect countries’ shares in real output, GDP data in national currencies should be converted into a common numeraire currency at purchasing power parity (PPP) rates. A review of the empirical evidence on the relationship between exchange rates and prices suggests that market (or official) exchange rates are generally poor proxies for PPP rates. The paper examines the PPP-based GDP data generated by the International Comparison Program and compares aggregations with PPP- and exchange rate-based GDP weights.

Suggested Citation

  • Marianne Schulze-Gattas & Anne Marie Gulde, 1992. "Aggregation of Economic Indicators Across Countries; Exchange Rate versus PPP Based GDP Weights," IMF Working Papers 92/36, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:92/36
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    Cited by:

    1. Coe, David T. & Helpman, Elhanan, 1995. "International R&D spillovers," European Economic Review, Elsevier, vol. 39(5), pages 859-887, May.
    2. Duarte, Agustin & Venetis, Ioannis A. & Paya, Ivan, 2005. "Predicting real growth and the probability of recession in the Euro area using the yield spread," International Journal of Forecasting, Elsevier, vol. 21(2), pages 261-277.
    3. Katrin Wesche, 1997. "The Stability of European Money Demand: An Investigation of M3H," Open Economies Review, Springer, vol. 8(4), pages 371-391, October.
    4. Dirk Frantzen, 1998. "R&D efforts, international technology spillovers and the evolution of productivity in industrial countries," Applied Economics, Taylor & Francis Journals, vol. 30(11), pages 1459-1469.
    5. Katrin Wesche, 1997. "The Stability of European Money Demand: An Investigation of M3H," Open Economies Review, Springer, vol. 8(4), pages 371-391, October.
    6. Fabio Moneta, 2005. "Does the Yield Spread Predict Recessions in the Euro Area?," International Finance, Wiley Blackwell, vol. 8(2), pages 263-301, August.

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