Transitivity, Substitution Bias and the Fixed Basket Multilateral Walsh Index for International Price and Real Expenditure Comparisons

Naohito Abe and D.S. Prasada Rao ()

No DP22-1_v2, RCESR Discussion Paper Series from Research Center for Economic and Social Risks, Institute of Economic Research, Hitotsubashi University

Abstract: We advocate the multilateral Walsh index as a viable alternative to the Gini-Eltetö-Köves-Szulc (GEKS) and Geary-Khamis methods used in the Penn World Table and the International Comparison Program (ICP). We show that it is the only symmetric average fixed basket price index that satisfies transitivity, country symmetry, and invariance to proportional changes in quantities. Simplicity and its superior axiomatic properties including identity and monotonicity, and with associated substitution bias comparable to that of the GEKS_Fisher index, and plausibility and comparability of results based on the 2017 ICP data make the multilateral Walsh method an ideal choice for international price comparisons.

Keywords: Price comparisons; Transitivity; Proportionality; Real expenditures (search for similar items in EconPapers)
JEL-codes: C43 E31 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2022-05
New Economics Papers: this item is included in nep-int and nep-mac
Note: 7 May, 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:hit:rcesrs:dp22-1_v2

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