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Regional Linking

The most important change that has been introduced to the ICP was the regionalization of the program since 1980. Prior to the regionalization of the program, ICP surveys were conducted using a common list of items in all regions and global PPPs were calculated by pooling all price data from all the participating countries.

With regionalization, participating countries are now grouped by regions and global comparisons are carried out in two stages:

  • First, regional surveys are conducted on the basis of region-specific baskets of goods and services, and regional PPPs are computed from the regional average prices. The regional PPPs are expressed in regional currencies, for example, Argentinean peso for Latin America and Hong Kong dollar for Asia.
  • Second, regional results are linked to estimate a globally consistent set of PPPs expressed in a common international currency, often the US dollar.

These issues are very important in improving the quality of purchasing power comparisons. Research was commissioned to address both micro and macro linkage problems. The research focused on developing methods to link regions so as to approximate the results that would be obtained from a world comparison of prices of comparable-quality items across all countries.

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