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International Comparison Program - Western Asia

  1. 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.
  2. Since quantities of goods and services are not additive, they have to be measured by proxy volume index numbers.
  3. 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.
  4. Therefore, the following problems have to be solved statistically and/or mathematically:
    1. Problems of differing qualities
    2. Problems of differing makes or models
    3. Problems of differing packages
    4. Problems of differing physical properties
    5. Problems of differing functionalities
    6. Problems of representativity and/or comparability
  5. 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.
  6. Hence, the ICP seeks to compute and use the Purchasing Power Parities (PPPs) instead of using the currencies exchange rates.
  7. 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.
  8. To calculate PPPs and other indices, the following sequent steps should be carried out:
    1. Conduct price surveys of specified goods and services
    2. Construct volume/price indices by using binary and multilateral matrices of price ratios
    3. Use GDP basic headings as weights to aggregate results to higher levels
    4. Fill empty cells with estimates in the price ratio matrices
    5. Calculate the PPPs at basic headings
    6. Link-up of regional PPPs with global PPPs for GDP components of participating countries.
  9. 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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