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

Author

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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.

Suggested Citation

  • Robert J. Hill & T. Peter Hill, 2007. "Regionalization and its Implications for Price Index Construction: The Case of the International Comparisons Program," Discussion Papers 2007-28, School of Economics, The University of New South Wales.
  • Handle: RePEc:swe:wpaper:2007-28
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    File URL: http://wwwdocs.fce.unsw.edu.au/economics/Research/WorkingPapers/2007_28.pdf
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    References listed on IDEAS

    as
    1. J. Peter Neary, 2004. "Rationalizing the Penn World Table: True Multilateral Indices for International Comparisons of Real Income," American Economic Review, American Economic Association, pages 1411-1428.
    2. 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.
    3. 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.
    4. 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.
    5. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584-584.
    6. Dowrick, Steve & Quiggin, John, 1997. "True Measures of GDP and Convergence," American Economic Review, American Economic Association, pages 41-64.
    7. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
    8. 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.
    9. Bhagwati, Jagdish N, 1984. "Why Are Services Cheaper in the Poor Countries?," Economic Journal, Royal Economic Society, vol. 94(374), pages 279-286, June.
    10. J. Peter Neary, 2004. "Rationalizing the Penn World Table: True Multilateral Indices for International Comparisons of Real Income," American Economic Review, American Economic Association, pages 1411-1428.
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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.

    More about this item

    Keywords

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

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F01 - International Economics - - General - - - Global Outlook
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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