Stochastic approach to computation of purchasing power parities in the International Comparison Program (ICP)

Rao, D. S. Prasada and Hajargasht, Gholamreza (2016) Stochastic approach to computation of purchasing power parities in the International Comparison Program (ICP). Journal of Econometrics, 191 2: 414-425. doi:10.1016/j.jeconom.2015.12.012

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Author Rao, D. S. Prasada
Hajargasht, Gholamreza
Title Stochastic approach to computation of purchasing power parities in the International Comparison Program (ICP)
Journal name Journal of Econometrics   Check publisher's open access policy
ISSN 0304-4076
1872-6895
Publication date 2016-04-01
Year available 2015
Sub-type Article (original research)
DOI 10.1016/j.jeconom.2015.12.012
Open Access Status File (Author Post-print)
Volume 191
Issue 2
Start page 414
End page 425
Total pages 12
Place of publication Amsterdam, Netherlands
Publisher Elsevier
Language eng
Subject 2002 Economics and Econometrics
2604 Applied Mathematics
1207 History and Philosophy of Science
Abstract The paper presents a stochastic approach based on the country-product-dummy (CPD) method for the computation of purchasing power parities (PPPs) in the International Comparison Program. The approach develops estimation strategies in conjunction with the country-product-dummy method to derive a range of multilateral index number methods for the compilation of PPPs at the basic heading level as well as at higher levels of aggregation. At the basic heading level our approach generates Jevons geometric index, arithmetic and harmonic indexes as well as the Dutot index. At higher levels of aggregation, a weighted stochastic model with alternative stochastic specifications and the method of moments (MOM) are used to derive the Geary-Khamis, Iklé, Rao and other multilateral index number methods employed in international comparisons. Expressions for computing standard errors for PPPs based on these formulae are also derived. Existence of solutions to the estimating equations derived from the weighted method of moments or the maximum weighted likelihood is also discussed. A numerical illustration based on ICP 2005 data is presented.
Keyword International Comparison Program
Method of moments
Non-additive linear models
Purchasing power parities
Standard errors
Stochastic approach
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: Official 2016 Collection
School of Economics Publications
 
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Created: Tue, 19 Jan 2016, 00:26:34 EST by Alys Hohnen on behalf of School of Economics