RECENT DEVELOPMENTS IN THE INTERNATIONAL COMPARISON OF PRICES AND REAL OUTPUT

Abstract

Three important current areas of research in the field of international comparisons are the construction of price indexes at the basic heading level, price indexes at higher levels of aggregation, and the linking of comparisons across regions. We consider recent innovations in each of these areas. These innovations have largely arisen out of International Comparisons Program (ICP) 2005, and hence we discuss them in this context. We give particular emphasis to the construction of price indexes at the basic heading level, because we believe it is here that the biggest problems lie. For example, the apparently anomalous results obtained for China and India in ICP 2005 can be traced back to problems at the basic heading level. We also highlight some inconsistencies in current ICP methodology and some promising areas for future research that warrant closer scrutiny in the next round of ICP.