Towards a simplified approach to international price comparisons: A case for the Multilateral Walsh Index

Naohito Abe and D.S. Prasada Rao ()

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

Abstract: We offer a simple alternative to the Gini-Eltetö-Köves-Szulc and Geary-Khamis methods used for international price and real expenditure comparisons. We show that the only symmetric average fixed basket price index that satisfies transitivity, country symmetry, and invariance to proportional changes in quantities is the multilateral Walsh index, a generalization of the superlative bilateral Walsh index (Diewert, 2001). Simplicity and its superior axiomatic properties, including identity and monotonicity, compared to current International Comparison Program (ICP) and Penn World Table (PWT) methods and plausibility and comparability of results based on the 2017 ICP data make the multilateral Walsh method an ideal choice.

Keywords: Price comparisons; Transitivity; Proportionality; Real expenditures (search for similar items in EconPapers)
JEL-codes: C43 E31 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2022-02
New Economics Papers: this item is included in nep-int and nep-mac
Note: 25 February, 2022
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