Eurostat-OECD Methodological Manual on Purchasing Power Parities (2012 Edition)

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The OECD, Eurostat, and 47 participating countries work together in establishing purchasing power parities, or PPPs, in order to compare the price and volume levels of the GDPs. This programme is called the Eurostat-OECD PPP Programme. The manual gives a complete, detailed and up-to-date description of the functioning of the programme. This includes its organisation, the various surveys carried out by participating countries and the ways PPPs are calculated and disseminated. It also provides guidance on the use of PPPs.


Calculation and aggregation of PPPs

Previous chapters describe how price and expenditure data are collected and validated for the international price and volume comparisons of GDP that Eurostat and the OECD make with purchasing power parities (PPPs). This chapter explains how Eurostat and the OECD use the validated data to compute multilateral PPPs for GDP and its component expenditures. The computation has two stages. During the first stage, PPPs are calculated for basic headings. In the second stage, basic heading PPPs are aggregated with GDP expenditures as weights to obtain PPPs for each aggregation level up to and including GDP. Many methods have been developed to calculate and aggregate PPPs1, but the chapter considers only the methods currently employed for Eurostat and OECD comparisons. It should be read in conjunction with Annex V which provides a numerical example to demonstrate how basic heading PPPs are calculated and subsequently aggregated.


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