Aggregation of Economic Indicators Across Countries: Exchange Rate versus PPP Based GDP Weights
IMF Working Papers, May 1, 1992
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- Aggregation of Economic Indicators Across Countries: Exchange Rate versus PPP Based GDP Weights
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Bibliographic details
- Authors: Marianne Schulze-Gattas, Anne Marie Gulde
- Published: May 1, 1992
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451845396.001
Summary
- Relative GDP shares are frequently used as weights in aggregations.
- To ensure 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 Areas and Keywords
- 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
Core Findings and Analysis
- Market (or official) exchange rates are generally poor proxies for PPP rates based on a review of empirical evidence.
- PPP-based GDP data from the International Comparison Program are used to construct GDP shares intended to reflect real output.
- Comparisons are made between aggregations that use PPP-based GDP weights and those that use exchange rate–based GDP weights.
Notes on Usage and Interpretation
- The Working Paper should not be reported as representing the views of the IMF. The views expressed are those of the author(s) and do not necessarily represent those of the IMF or IMF policy.
- Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.
Source: IMF Working Papers — "Aggregation of Economic Indicators Across Countries: Exchange Rate versus PPP Based GDP Weights", May 1, 1992.