Quality Assurance Procedures for Estimating Purchasing Power Parities
"Learn about quality assurance procedures for estimating purchasing power parities (PPPs) in the 39th session including the importance of PPPs, the PPP estimation process, and an overview of quality assurance methods to ensure data quality and accuracy across regions and countries."
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Quality Assurance Procedures for Quality Assurance Procedures for Estimating Purchasing Power Parities Estimating Purchasing Power Parities 39thSession Marko RISSANEN, Statistician, The World Bank Group, Washington, DC, USA; mrissanen@worldbank.org Nada HAMADEH, Senior Statistician, The World Bank Group, Washington, DC, USA; nhamadeh@worldbank.org
Introduction Introduction: : PPPs PPPs and ICP and ICP What are PPPs Purchasing power parities are conversion rates that convert to common currency while equalizing the purchasing power of different currencies Accurate volume measures of economic activity, as well as comparisons of standards of living across countries, require conversion rates that take into account price levels Why use PPPs The International Comparison Program (ICP) is a worldwide statistical initiative designed to estimate PPPs; partnership of +200 countries, regional and global organizations What is ICP
PPP Estimation Process PPP Estimation Process National implementing agencies (NIAs) collect prices and related data for items (regional/global) covering a whole range of final goods and services (GDP) Country Level Regional implementing agencies (RIAs) use national prices to estimate regional PPPs: - At basic heading level (CPD: prices + missing prices) - Above the basic headings (GEKS: PPPs + exp. weights) Regional Level Global ICP Unit (GIU) uses regional data to estimate global PPPs: - Global prices are used to calculate linking factors (CPD) - Regional PPPs are linked using the linking factors - Global PPPs are aggregated (GEKS) - Global PPPs are adjusted for fixity (CAR) Global Level
Overview of Quality Assurance Overview of Quality Assurance Inter-Country Validation By RIAs and GIU To ensure data quality and plausibility of the results across the regions Validation Stages By NIAs To ensure data quality within the country By NIAs and RIAs To ensure data quality and plausibility of the results within the region Intra-Country Validation Global Validation Generation of validation measures Iterative Process Correction Review
Intra Intra- -Country Validation Country Validation Review of merged datasets; item codes; observed quantities and units of measurement; sub-national price variations; temporal price variations Initial Validation Review of average price measures: coefficients of variation; max/min ratios Review of individual price observation measures: standard deviations; t-values Statistical Tests Data Finalization Preparation of average prices; number of observations; coefficients of variation
Inter Inter- -Country Validation Country Validation Initial Validation Review for extreme data errors Validation at BH level Comparison of averages prices and related measures across the countries (main phase of the validation stage) Validation above BHs Comparison of averages prices and related measures across the countries above a single basic heading (BH) Temporal Validation Comparison of PPP and price level indices across time Data Finalization Preparation of final regional results and data for submission (after iterative rounds)
Example: Example: Quaranta Quaranta Table Table Milk, fresh, unskimmed, well known brand CV 19.2 CTR LCU price #Obs CV XR-Price GM 1.19 XR-Index PPP-Price GM 1.19 PPP-Index AR BD BR CO GH ID KE KH MW NG PE PH VE VN ZA 14.08 62.31 2.93 132 86 726 162 35 294 24 6 30 279 80 179 165 276 88 17 3 20 18 11 24 31 5 27 28 11 6 26 21 17 0.98 0.80 0.75 0.81 2.58 1.49 1.21 1.98 0.91 2.35 1.04 1.67 0.69 1.57 0.79 82 67 63 68 216 125 102 166 76 197 87 140 58 132 67 0.89 1.09 0.98 1.06 1.31 1.23 1.31 1.60 1.21 1.47 0.95 1.34 0.99 1.69 1.11 75 91 82 89 110 103 110 134 101 123 79 112 83 142 93 2,726.92 10.18 20,206.00 122.67 7,960.09 666.69 466.70 3.63 79.63 276.88 35,019.00 12.75
Global Validation Global Validation Regional Quality Review of regional quality thresholds Review of representativity of global prices among regional prices; quality of global prices across the countries; variability of the inter-regional linking factors Global Price Quality Quality of Global PPPs Degree of similarity of aggregated bilateral PPPs (Paasche-Laspeyres spreads) Plausibility of Global Result Historical results; Penn-effect; Balassa Samuelson effect
Example: Price Level vs GDP p.c. Example: Price Level vs GDP p.c.
Thank You Thank You Measuring the Real Size of the World Economy: The Framework, Methodology, and Results of the International Comparison Program Additional Resources Purchasing Power Parities and the Real Size of World Economies: A Comprehensive Report of the 2011 International Comparison Program Operational Guidelines and Procedures for Measuring the Real Size of the World Economy: 2011 International Comparison Program Follow Us Online http://siteresources.worldbank.org/ICPEXT/Resources/I CP_2011.html
