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New Method to Compute Global PPPs

One of the most significant changes in methodology between the 2005 and 2011 rounds of ICP is the method used to link the ICP regions to generate the global comparison. The 2011 linking procedures differ from those used in 2005 in two important respects: (1) at the basic heading level, in 2005 only 18 countries participated in the Ring, a special group covering representative countries from ICP regions to be used in linking, whereas in 2011 almost all participating countries contributed to the inter-regional linking; (2) at the aggregate level (i.e. above the basic heading), in 2011 a new method (CAR - Country Approach with Redistribution) was implemented in place of the so-called super-country method, in which linking factors were computed for regional aggregates (super-countries).

2011 Linking Method at the Basic Heading Level - an Extension of the Ring Approach

The Ring method used in 2005 was a step forward compared to the single-country bridges used in previous rounds. However, an obvious extension of the method would be to include more countries, which was the approach adopted for 2011. Almost all countries from Africa, Asia and the Pacific, Latin America, Western Asia, and Eurostat-OECD (CIS was linked via Russia into the Eurostat-OECD region and the Caribbean was linked directly via Latin America) were used in linking in the 2011 round. To that end, the countries collected Global Core List (GCL) items. Even though fewer GCL products were specified (around 600 items) than the ring products in 2005, the efficiency of the GCL approach was superior to the Ring method because of the almost universal coverage of countries and the GCL items were included in the calculation of regional PPPs.

2011 Linking Method at the Aggregate Level - Country Approach with Redistribution (CAR) Method

For 2011, the CAR method was introduced to link the regions at the aggregate level. First, global matrices of basic heading PPPs and expenditures were constructed; second, an unrestricted GEKS aggregation was run on those matrices to arrive at PPPs and real expenditures at every level of aggregation; third, for each region, the regional total of real expenditures was obtained by summing real expenditures for all countries in that region; fourth, those regional totals were distributed among the countries of each region according to the fixity principle.




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