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PPPs: Purchasing Power or Producing Power Parities?

John Baldwin

Economic Analysis (EA) Research Paper Series from Statistics Canada, Analytical Studies Branch

Abstract: This paper examines the different types of deflators that are used to compare volume estimates of national income and production across countries. It argues that these deflators need to be tailored to the specific income concept used for study. If the potential to spend concept is employed, a purchasing power deflator is needed. If a production based concept is used, a producing power deflator is necessary. The paper argues that present practice produces a hybrid deflator that fails both purposes when terms of trade shifts are large and offers a solution.

Keywords: Economic accounts; International trade; Gross domestic product; Income and expenditure accounts; Trade patterns (search for similar items in EconPapers)
Date: 2009-12-10
New Economics Papers: this item is included in nep-opm
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