Inconsistencies in cross-country price comparisons over time: patterns and facts

Robert Inklaar*, Ryan Marapin, P.J. Woltjer, Marcel P. Timmer

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingChapterAcademicpeer-review

Abstract

Purchasing power parities (PPPs) aim to measure relative price levels across countries, like inflation aims to measure relative price levels over time. Ideally, the change in PPPs over time should be consistent with relative inflation, but in practice inconsistencies tend to be substantial, which leads to uncertainty about the relative size of economies across countries. We look for patterns in the PPP data to better understand when and where inconsistency is a more serious problem. We find smaller inconsistencies between more recent PPP comparisons, for countries more similar in terms of income levels and expenditure patterns, but larger inconsistencies for consumption products where measurement challenges are larger. Inconsistencies that distort the international income distribution are uncommon. More frequent PPP surveys are unlikely to decrease
inconsistency.
Original languageEnglish
Title of host publicationAdvances in Economic Measurement
Subtitle of host publicationA Volume in Honour of D.S. Prasada Rao
EditorsDuangkamon Chotikapanich, Alicia Rambaldi, Nicholas Rohde
Place of PublicationSingapore
PublisherPalgrave Macmillan
Chapter13
Pages633-663
Number of pages29
ISBN (Electronic)9789811920233
ISBN (Print)9789811920226
DOIs
Publication statusPublished - 4 Oct 2022
Externally publishedYes

Keywords

  • Price Measurement
  • Purchasing Power Parities
  • International Income Differences

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