Aggregation of Economic Indicators Across Countries: Exchange Rate versus PPP Based GDP Weights
May 1, 1992
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Summary
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.
Subject: Currencies, Exchange rates, Expenditure, Foreign exchange, Market exchange rates, Money, Public investment and public-private partnerships (PPP), Purchasing power parity
Keywords: Asia and Pacific, Currencies, Eastern Europe, Exchange rates, GDP data, GDP weight, Global, Market exchange rates, Middle East, PPP, price level, Public investment and public-private partnerships (PPP), Purchasing power parity, weighting system, Western Hemisphere, world GDP growth, WP
Pages:
44
Volume:
1992
DOI:
Issue:
036
Series:
Working Paper No. 1992/036
Stock No:
WPIEA0361992
ISBN:
9781451845396
ISSN:
1018-5941
