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New Methodology for Linking the Regions

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  • Diewert, Erwin

Abstract

The paper explains new methodology that was used in the 2005 International Comparison Program (ICP) that compared the relative price levels and GDP levels across 146 countries. In this round of the ICP, the world was divided into 6 regions: OECD, CIS, Africa, South America, Asia Pacific and West Asia. What is new in this round compared to previous rounds of the ICP is that each region was allowed to develop its own product list and collect prices on this list for countries in the region. The regions were then linked using another separate product list and 18 countries across the 6 regions collected prices for products on this list and this information was used to link prices and quantities across the regions. An additional complication was that the final linking of prices and volumes across regions had to respect the regional price and volume measures that were (separately) constructed by the regions.

Suggested Citation

  • Diewert, Erwin, 2008. "New Methodology for Linking the Regions," Economics working papers erwin_diewert-2008-9, Vancouver School of Economics, revised 09 Sep 2008.
    • Handle: RePEc:ubc:bricol:erwin_diewert-2008-9
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    File URL: http://www.econ.ubc.ca/discpapers/dp0807.pdf
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    References listed on IDEAS

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    1. Robert J. Hill, 2004. "Constructing Price Indexes across Space and Time: The Case of the European Union," American Economic Review, American Economic Association, vol. 94(5), pages 1379-1410, December.
    2. 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.
    3. Robert J. Hill, 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.
    4. 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.
    5. James R. Cuthbert, 2000. "Theoretical and practical issues in purchasing power parities illustrated with reference to the 1993 Organization for Economic Co‐operation and Development data," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 163(3), pages 421-444.
    6. Robert J. Hill, 1999. "Comparing Price Levels across Countries Using Minimum-Spanning Trees," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 135-142, February.
    7. W. Erwin Diewert, 1999. "Axiomatic and Economic Approaches to International Comparisons," NBER Chapters, in: International and Interarea Comparisons of Income, Output, and Prices, pages 13-107, National Bureau of Economic Research, Inc.
    8. Hill, Robert J, 2001. "Measuring Inflation and Growth Using Spanning Trees," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(1), pages 167-185, February.
    9. 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.
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    Cited by:

    1. Fadi Hassan, 2014. "The Price of Development," The Institute for International Integration Studies Discussion Paper Series iiisdp446, IIIS.
    2. Hassan, Fadi, 2016. "The price of development: The Penn–Balassa–Samuelson effect revisited," Journal of International Economics, Elsevier, vol. 102(C), pages 291-309.
    3. Fadi Hassan, 2011. "The Penn-Belassa-Samuelson Effect in Developing Countries: Price and Income Revisited," CEP Discussion Papers dp1056, Centre for Economic Performance, LSE.
    4. Angus Deaton & Olivier Dupriez, 2011. "Purchasing Power Parity Exchange Rates for the Global Poor," American Economic Journal: Applied Economics, American Economic Association, vol. 3(2), pages 137-166, April.
    5. Robert J. Hill & Alice O. Nakamura, 2010. "Improving Inflation And Related Performance Measures For Nations: An Introduction," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(s1), pages 1-10, June.
    6. Angus Deaton & Alan Heston, 2010. "Understanding PPPs and PPP-Based National Accounts," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(4), pages 1-35, October.
    7. Oulton, Nicholas, 2011. "The wealth and poverty of nations: true PPPs for 141 countries," LSE Research Online Documents on Economics 48941, London School of Economics and Political Science, LSE Library.
    8. Erwin Diewert, 2010. "New Methodological Developments For The International Comparison Program," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(s1), pages 11-31, June.
    9. repec:pri:rpdevs:deaton_price_indexes_inequality_and_the_measurement_of_world_poverty_aer. is not listed on IDEAS
    10. Hill, Robert J., 2016. "A least squares approach to imposing within-region fixity in the International Comparisons Program," Journal of Econometrics, Elsevier, vol. 191(2), pages 407-413.
    11. Angus Deaton, 2010. "Price Indexes, Inequality, and the Measurement of World Poverty," American Economic Review, American Economic Association, vol. 100(1), pages 5-34, March.

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    More about this item

    Keywords

    Index numbers; multilateral comparison methods; GEKS; EKS; Geary-Khamis; Balk; Dikhanov; Iklé; Country Product Dummy (CPD) method; basic headings; St;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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