The Domestic Price System of Economic Analysis

Steve Curry and John Weiss
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Steve Curry: Asian Development Bank
John Weiss: University of Bradford

Chapter 6 in Project Analysis in Developing Countries, 2000, pp 137-166 from Palgrave Macmillan

Abstract: Abstract Chapter 5 discussed how all project outputs and inputs can be valued at world prices or world price equivalents to assess their economic value. Economic analyses can be carried out using different units of account or numeraire. As with distance, which can be measured in miles or kilometres, the choice of different units makes the same calculation appear different, but provided equal accuracy is used, the results will be directly equivalent. This chapter considers how the domestic price level can be used to measure economic values, in what we will term a domestic price system. It commences by discussing the conditions under which world and domestic price systems give a numeraire. It then considers the shadow exchange rate, a key parameter in the domestic price system. The detail of how conversion factors for traded and non-traded goods and labour are derived in a domestic price system is discussed, before land and the discount rate are considered briefly. The appendix reworks the irrigation case study from Chapter 5 in a domestic price system.

Keywords: Foreign Exchange; Price System; Domestic Price; World Price; Domestic Prex (search for similar items in EconPapers)
Date: 2000
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-37511-6_6

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DOI: 10.1057/9780230375116_6

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