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Regional Comparison Region 2 E 2 Region 1 1 BH p/PPPs RING A D C B BH p/PPPs 1 Ring Comparison Region 2 E GDP PPP 1 RING 2 GDP PPP Region 1 A B D C 2 Region 1 A B D C Regional Comparison 1. Input: item prices (p) for all countries in region 2. Output: basic heading PPP for each country – – Relative to one base country or Relative to average of all countries 3. Divide ring country item prices by the basic heading PPP – Region 1 ring country prices = (p/PPP) 3 RING 2 1 Ring comparison 1. Input: Region 1 ring country prices (p/PPP), and same for all other ring countries. 2. Output: GPD PPP for each region - Relative to one base region or - Relative to average of all regions 3. Multiply country PPPs by regional PPPs - PPPs (country) x PPP (region) = PPP global Either at Basic Heading level or GDP level for the country PPPs 4 Example: Basic Heading = Shoes (1) Input Item Prices Basic Heading: Shoes (1) Prices in National Currencies Item: Casual Dress Sports Kids Region 1 country A 4 12 15 2 country B 9 30 30 3 country C 20 70 65 5 country D 16 60 50 7 Region 2 country E 2 4 0.6 Sandals 8 20 0.3 5 Find prices relative to a base country and then the country PPPs (unweighted geometric mean in this example) (2) Find prices relative to a base country and then find the PPP (Geomean) for each country (2) Item: Region 1 country A country B country C country D Region 2 country E Prices Relative to Country D Casual Dress Sports Kids 0.25 0.56 1.25 1.00 - 0.20 0.50 1.17 1.00 0.30 0.60 1.30 1.00 0.29 0.43 0.71 1.00 2 4 0.6 Sandals - Country PPP Shoes GeoMean 0.256 0.519 1.079 1.000 0.3 1.095 6 Same for Fruit (2nd Basic Heading) Country PPP Shoes GeoMean Country PPP Fruit GeoMean Aggregate country PPPs within Regions can be calculated (even before Ring comparison): 0.256 0.519 1.079 1.000 1.237 1.750 4.518 1.000 1.095 1.377 PPP (shoes + fruit) Region 1 unwtd geomean country A 0.563 country B 0.953 country C 2.208 country D 1.000 Region 2 country E 1.228 7 Divide BH prices by BH PPPs = (p / PPP) keeping only SPDs that are in RING comparison (eg drop Casual shoes, keep Sandals) (3) Divide original prices in national currencies (1) by the PPP in (2) Input to Ring (3) Prices / Country PPP Item: Casual Dress Sports Kids Sandals Region 1 country A 46.90 58.63 7.82 31.27 country B 57.85 57.85 5.79 38.57 Region 2 country E 1.83 3.65 0.55 0.27 8 Repeat procedure done previously,but now find prices relative to base region and regional PPPs (4) Find prices relative to a base region and then find the PPP (Geomean) for each region Ring Comparison (4) Item: Region 1 country A country B Region 2 country E Prices Relative to Region 2 Dress Sports Kids 25.69 31.69 16.06 15.84 14.27 10.56 Sandals Regional PPP Shoes Geomean 29.01 114.17 140.83 1.00 1.00 1.00 1.00 1.00 9 Fruit (2nd Basic Heading) Regional PPP Shoes Geomean 29.01 1.00 Regional PPP Fruit Geomean 6.86 1.00 Unweighted Aggregate geomean is calculated. Equals the regional PPP or factor. PPP (shoes + fruit) Region 1 14.11 Region 2 1 10 To Find the Global PPPs The aggregate (food+fruit) PPP in this example, is a regional factor. • 1) Use this factor to multiply country-specific prices and find the aggregate PPP for each country. OR • 2) Find the aggregate PPP for each country first, then multiply by the factor. Both will yield the same relative global PPPs. (In other words, within-region relationships are preserved.) 11 1) Multiply country PPPs times the regional PPP factor from Ring (5) Shoes: Region 1 country A country B country C country D Region 2 country E 1.095 (5) Fruit Region 1 country A country B country C country D Region 2 country E Country Regional Adjusted PPP PPP PPP (a) (b) (a x b) 0.256 14.11 3.61 0.519 14.11 7.32 1.079 14.11 15.22 1.000 14.11 14.11 1.00 1.095 Country RegionalAdjusted PPP PPP PPP (a) (b) (a x b) 1.237 14.11 17.46 1.750 14.11 24.69 4.518 14.11 63.75 1.000 14.11 14.11 1.377 1.00 Find the Aggregate PPP = Geometric Mean Shoes+Fruit Region 1 country A country B country C country D Region 2 country E Adj PPP Aggregate 7.94 13.44 31.15 14.11 1.23 1.377 12 OR 2) multiply aggregate country PPPs (slide 7) times the factor Shoes+Fruit Country PPP Regional PPP Adj PPP Aggregate Aggregate Region 1 (a) (b) (a x b) country A 0.563 14.11 7.94 country B 0.953 14.11 13.44 country C 2.208 14.11 31.15 country D 1.000 14.11 14.11 Region 2 country E 1.228 1.00 1.23 13