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International Comparison Program - Western Asia
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| Methodologies |
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The ICP methods, fundamentally, aim at comparing
similar, if not identical, volumes of goods and services
produced by the countries under comparison in a given
period of time.
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Since quantities of goods and services are not
additive, they have to be measured by proxy volume index
numbers.
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Since comparison should be based on comparing "like
with like", then compared goods and services have to be
subjected to stringent rules, i.e. they should reflect
common charactericity, representativity and
comparability.
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Therefore, the following problems have to be solved
statistically and/or mathematically:
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Problems of differing qualities
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Problems of differing makes or models
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Problems of differing packages
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Problems of differing physical properties
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Problems of differing functionalities
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Problems of representativity and/or comparability
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Apart from those physical or quantity problems, there
are the problems of prices and values in terms of
national currencies. Using the currencies exchange rates
to express identical values of the same goods and
services was found faulty and misleading.
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Hence, the ICP seeks to compute and use the Purchasing
Power Parities (PPPs) instead of using the currencies
exchange rates.
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The term PPP is defined as the number of units of a
country's currency required to buy the same amounts of
goods and services in the domestic market as, say, one
dollar would buy in the United States.
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To calculate PPPs and other indices, the following
sequent steps should be carried out:
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Conduct price surveys of specified goods and services
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Construct volume/price indices by using binary and
multilateral matrices of price ratios
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Use GDP basic headings as weights to aggregate results
to higher levels
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Fill empty cells with estimates in the price ratio
matrices
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Calculate the PPPs at basic headings
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Link-up of regional PPPs with global PPPs for GDP
components of participating countries.
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Analyses of results include derivation of various
indicators, e.g. human development indices etc…,
interpretation of levels and deviations of countries
indicators. Extrapolation and forecasts of PPPs can also
be carried out to estimate missing indicators or to
envision future years.
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