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2

Introduction

Purpose of the ICP

UN System of National Accounts calls for comparisons of GDP across countries be using PPPs

The ApproachCollection of prices for well-defined

basket of goods & services

Review & harmonisation of National Accounts

Use of state-of-the-art statistical methods

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Survey Frame

# Items Coverage Time

Household Consumption 1 016 Urban/Rural 12 months

Health 13 Mainly urban 2 months

Education 5 Mainly urban 2005

Government Consumption 18 Country 2005

Machinery and equipment 185 Mainly urban 2006

Construction 34 Mainly urban 2006

Total 1 271

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(I)

j ij

jij

jij

i

ppp

PPP

(II)

i ij

iij

iij

j

ppp

PPP

CPD Regression : at basic heading level

Purchasing Power Parities - The Mathematical Methods

IKLE Iterative System of Equations : for PPP aggregation

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Start with the full GDPdivide into subgroups155 Basic Headings

Start with the full GDPdivide into subgroups155 Basic Headings

E.g. Food29 Basic Headings

E.g. Food29 Basic Headings

Define productsmatching “like with like”

collect prices

Define productsmatching “like with like”

collect prices

about 10 per Basic

Heading

about 10 per Basic

Heading

1,000+ products

1,000+ products

Calculate Basic Heading parities

Calculate Basic Heading parities Regional PPPs at

Basic Heading level

Regional PPPs atBasic Heading level

Combine Basic HeadingPPPs to subgroups,

then to GDP

Combine Basic HeadingPPPs to subgroups,

then to GDPFirst Regional, then Global GDP PPPsFirst Regional, then Global GDP PPPs

Purchasing Power Parities - The Steps

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Table 03Price Level Indices – Indices de niveau des prix

PLI = PPPs / Exch Rates

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Conclusion

Country benefits

1. Cross country Comparison of GDP & related aggregates

2. USD1/Day Poverty Line, HDI at provincial district levels (Poverty PPPs)

3. Poverty Analysis4. Harmonize of economic policies (regional & sub-

regional integration)5. Foster intra African trade6. Comparison of Price levels; wage differentials, cost

production (investment, employment policy decisions)

International level

• establishing international poverty threshold (World Bank)

• constructing Human Development Index (UNDP)• comparing health expenditure per capita (WHO)• assessing per capita expenditures in education

(UNESCO)• monitoring the welfare of children (UNICEF)• comparing the relative sizes of economies (AfDB, IMF)• estimating weighted averages of regional growth rates

(AfDB, IMF)

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Thank You Merci