Transcript Document

Introduction to
International Comparison
Program
Regional Course on Price Statistics and ICP
Male, Maldives
25-29 September 2005
TIMOTHY LO
Statistician, International Comparison Program
Asian Development Bank
1
Why Do We Use PPPs?
• Exchange rates do not measure relative price
levels in domestic markets thus, giving
inconsistent estimates of income levels.
• Exchange rates are influenced by factors
other than changes in relative prices, such as
interest rates and financial flows, so they do
not move in line with relative prices.
2
ICP
How many goods
your money can buy?
3
ATLAS
How many dollars
your money can buy?
Low income countries’ share of world income is
higher and increasing in PPP terms
Percentage Share of World Income, by income groups
ICP and Atlas: 1987 and 1995
Country Group
ICP
1987
1995
6
5
13
18
Middle income
17
14
26
24
High income
78
81
61
58
100
100
100
100
Low income
World
4
Atlas
1987
1995
Are the Japanese really richer than Americans?
Yes, if they would spend all their money in the US
2. Japan/US - While relative growth rate is about the same,
Japan's exchange rate appreciates
(Japan/US 1985 =100)
1. Japan/US:: Atlas shows Japan richer; PPP estimates
show the opposite. (Per capita income US=100)
300%
175%
Atlas Japan
150%
250%
PPP Japan
200%
125%
150%
100%
100%
75%
50%
50%
0%
1985
5
1987
1989
1991
1993
1995
1985
Gr. Rate
Exch. Rate
1987
1989
1991
1993
1995
10 year comparison of the USA and China
1. China/US - PPP estimates rise to keep pace with real
growth, Atlas estimate remains flat
(Per capita income US=100)
12.0%
9.0%
2. China/US: China's economy grows faster while the
exchange rate depreciates
(China/US 1985 = 100)
250%
Gr. Rate
200%
Exch. Rate
150%
100%
50%
0%
Atlas China
PPP China
6.0%
3.0%
0.0%
1985
6
1987
1989
1991
1993
1995
1985
1987
1989
1991
1993
1995
China not Japan is the second largest economy
Chart 2A: Rank order of largest economies in Atlas dollars, 2002
Chart 2B: Rank order of largest economies in PPP dollars,
2002
United States
Japan
Germany
United Kingdom
France
China
Italy
Canada
Mexico
Spain
India
Brazil
Korea, Rep.
Netherlands
Australia
Russian Federation
United States
China
Japan
India
Germany
France
United Kingdom
Italy
Brazil
Russian Federation
Canada
Mexico
Spain
Korea, Rep.
Australia
Netherlands
0
2,000
4,000
6,000
8,000
Billions of US dollars
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10,000
12,000
0
2,000
4,000 6,000 8,000 10,000 12,000
Billions of US dollars
Why countries participate in the
ICP?
PPPs can answer the following:
• How expensive is my country relative to other
countries?
• How well off are people in my country relative to
others?
• What is the incidence & severity of poverty in my
country relative to my neighbors?
 PPPs can be used for poverty analysis together with detailed
household income expenditure surveys
• How different is my economic structure?
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How expensive is my country?
PPPs can tell us the following:
• What is the price level of Big Mac?
• What is the price level of haircuts?
• What is the overall price level? PPP/ExRate
• How is the relative price level changing over time?
• Need PPP as well as good price deflators such as CPI.
• Persistent imbalance of price levels with respect to
neighbors & trading partners.
• Need PPP to manage trade & tourism policy.
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How well off are people in my country?
Furthermore, PPPs give us the following information:
• How many goods & services that I can buy with my
income relative to my neighboring countries?
• How are these relative quantities changing over time?
• Where does my country stand in the HDI index &
how is my relative position changing?
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What is the incidence & severity of
poverty?
• Do the poverty line incomes of different
countries have the same purchasing power?
• What is the relative incidence & severity of
poverty in different regions of my country?
• How is it changing?
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What is the incidence & severity of
poverty?
ICP can provide the answers but requires the
following additional components:
• PPP for the poor with “poverty” basket.
• intra-regional poverty PPP.
• mechanism for continuous updating.
• Detailed national level household income
expenditure surveys.
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How different is my economic structure?
• Are we investing relatively too little?
• Is my government too large?
• Structure of economy clusters around income levels.
• Helps determine which policies work & which do not.
• Helps determine sign posts for growth policy.
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ICP and Statistics
• ICP subjects national statistics to international
scrutiny.
• Helps spread of international standards & adoption of
best practice methods.
• Builds statistical capacity by harmonizing PPP work
with other national statistical activity to make ICP
cost effective, become part of the routine & be
sustainable over time.
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Why should International organizations
care about PPP?
PPPs give consistent measures of economic performance
& economic structures needed to:
• Get a better handle on the comparative levels of
income, poverty, price levels, economic structure,
among member countries.
• Devise essential policy advice to countries.
• Help direct scarce resources to where it is needed most.
• Monitor progress in meeting the Millennium
Development Goals.
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Analytical uses of PPP Data
• Explanation of economic, social phenomena
• Convergence of growth & economic structure
• Comparative advantage in international trade
• Structural adjustment
• Assessment of poverty
• Analysis of exchange rate behavior
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Business use of PPP
• Computation of compensation of headquarters staff
stationed abroad
• Evaluation of cost of labor & material for use in
competitive bidding
• Analysis of size of markets in search for profitable
direct investment opportunity
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Use by international organizations
• World Bank – estimating an international poverty line
• UNDP - for the HDI
• IMF - assigning country weights in Economic Outlook
• EU - distributing structural fund
• USAID - assessing aid eligibility
In spite of these uses, more substantive use in
administrative decisions is hampered by lack of
coverage, continuity and poor data quality.
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The ICP Process
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ICP Methods
• Divide GDP into 155 basic headings of expenditure.
• Formulate the regional product list.
• Collect prices of the same items in each country.
• Compute BH level price parities as average of price
ratios of items within the basic heading.
• Compute multilateral PPP as expenditure weighted
average of BH level parities.
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Data needed for PPP calculation
• National annual average prices of specified items,
usually 5 or more per basic heading.
• GDP expenditure broken down into basic headings.
• Population for computing per capita values.
• Exchange rates for comparing with PPP.
• Assorted statistics on CPI, other price indices, and
GDP growth rates.
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ICP requirements
• Countries do not select products for pricing
– Fixed by the regional product list
• A sample of places & time is needed
– A national annual average price is required
• Scope of the survey must be the same in every
country
– Needed for international comparability
• Must use existing infrastructure as far as possible
– Too costly to duplicate CPI infrastructure
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Brief History of ICP
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•
Global statistical initiative established in the early
1960’s as a joint venture of the UN, University of
Pennsylvania & the World Bank to facilitate crosscountry comparisons of price levels & economic
aggregates in real terms.
•
Since the first round, the program has grown to a
global initiative with around 150 countries from all
regions of the world participating in the 2005 global
round.
•
ICP is now an integral part of national statistical
work in OECD & other European countries.
New Global, Regional & National
Management Structure
• Partnership-based program
• Consultation with Heads of NSO’s as well as price
statisticians, price collectors & NA experts
• Collective commitment & joint effort of all
stakeholders at all levels
• Global Office - World Bank
• Regional Coordinator for Asia/Pacific - ADB;
• National Coordinator - NSO’s
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New Global, Regional & National
Management Structure
• No single agency plays a dominant role
• Bottom-up approach supported by common
interests national, regional & international
levels
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Management & Coordination of ICP
• Global level
• Executive Board
• Technical Advisory Group
• ICP Council
• Global Office
• Regional level
• Regional Advisory Board
• Regional Implementing Agencies
• National level
• National Implementing Agencies
• National Administrators
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Executive Board
Council
Africa
Tech
Advisory
Group
Global
Office
Asia
Pacific
CIS
LAC
Eurostat/OECD
Regional Advisory Board
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West
Asia
ICP Executive Board
• Provides leadership & determine strategic priorities
• Promulgates ICP standards
• Approves annual work programs & budgets
• Oversees activities of the ICP Global Office
• Commissions evaluations of the Program
• Plays a role in resource mobilization
• Resolves conflicts faced by the Program
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Executive Board Members
Dennis Trewin, ABS
Ifzal Ali, ADB
Shaida Badiee, WB
Len Cook, Office for Nat’l Stat, GB
Enrico Giovannini, OECD
Carlos Jarques, IADB
Henock Kifle, AfDB
Ben Kiregyera, Uganda Bu of Stat
Adarsh Kishore, MSPI, India
Li Xiaochao, NBS, China
Brian Newson, Eurostat
Koffi Nguesssan, ENSEA
Luis Machinea, ECLAC
Jacob Ryten, consultant
Vladimir Sokolin, Gokomstat, Russia
Mervat Tallawy, ESCWA
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ICP Council
• Represents stakeholders of the ICP not represented
elsewhere
• Composed primarily of sponsors of the program & by
invitation, users of its output
• Provides an info-sharing vehicle thru which stakeholders
can observe & comment on ICP progress; donors can
monitor spending of their donations
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Technical Advisory Group
• Resolves technical issues comprising conceptual
integrity & methodological adequacy
• Advises on issues involving standards, methods &
procedures required by the Program
• Proposes research or analysis necessary if the ICP is to
continue evolving in the face of changing circumstances
& providing better answers to user concerns
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TAG Members
Chair:
Alan Heston, Univ. of Pennsylvania
Members:
Erwin Diewert, Univ. of British Columbia
Paul McCarthy, ABS
D. S. Prasada Rao, Univ. of Queensland
David Roberts, OECD
Serguei Sergueev, Statistics Austria
Silke Stapel, Eurostat
Angus Deaton, Princeton Univ.
Kimberly Zieschang, IMF
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ICP Global Office
• Overall coordination & implementation of ICP
• Preparation of annual budgets & work programs
• Provision of secretariat functions to the EB
• Development of ICP standards to be promulgated by
the EB
• Liaison with & technical backstop for the regional
implementing agencies
• Global aggregation, analysis & dissemination
• Networking & coordination with TAG, Eurostat, OECD &
other agencies
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Role of Regional Implementing Agencies
• Maintain close relationship with the GO including regular
& extensive exchange of info
• Design & implement regional programs, database mgt
standards, guidelines & procedures as agreed with the
GO
• Coordinate efforts of participating countries in the region
thru info dissemination, training, promoting ICP
standards & guidelines, and use of ICP software
• Strike a workable compromise with the countries on
pricing of items in the product list and estimation of
expenditure weights
34
Role of Regional Implementing Agencies
• Ensure that inter-regional link countries carry out
their respective duties
• Provide technical guidance & effective leadership to
countries with advice from the TAG where necessary
• Monitor implementation of the Program in the
countries
• Aggregate national results to calculate PPP indices &
apply them to derive GDP volume measures
• Analyze regional results
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Role of National Implementing Agencies
• Ensure correct estimation of GDP expenditure weights for
ICP
• Ensure full understanding, by ICP staff, of Program
objectives & standards & how these objectives affect
collection of necessary data
• Maintain contact with participating countries about
consistency & understanding of regional targets & methods
• Ensure that data collection is carried out according to
agreed product specifications, classifications & time
intervals
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Regional Advisory Board
• Sets regional goals, priorities & objectives
• Approves work programs & provide guidance to the
regional coordinating agency
• Keeps all parties involved & informed
• Reviews annual reports on ICP progress
• Supports the sustainability of the program, & shapes
the vision for its future direction
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RAB
ICP Asia Pacific – Members
Chair:
Commissioner, Nat’l Bureau of Stat, HK, China
Co-chair:
Chief Economist, ADB
Vice Chair:
Director General, Stat Bureau, Japan
Members:
Director General, CSO, India
Director General, Statistics Indonesia
Administrator, NSO, Philippines
Deputy Chief Statistician, ABS
Director, Statistics Division, ESCAP
Director, SIAP
Director General, NBS, PRC
38
RAB
ICP Asia Pacific – Members
The remaining members of RAB
Ex-officio Members: ICP Global Coordinator, WB
Member Secretary: Assistant Chief Economist, ADB
Regional Coordinator, ICP Asia Pacific, ADB
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Role of National Adminstrators
• Implement ICP in the country
• Liaise with the Regional Coordinator
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Framework of Partnership
• Establishes the general framework to guide the
program of work between the Regional Implementing
Agency (ADB for ICP Asia Pacific) & the NSOs
• Enumerates the activities & responsibilities required
for the ICP activities in 2003-2006
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Participating Countries in
ICP Asia Pacific
•Bangladesh
•Maldives
•Bhutan
•Mongolia
•Brunei
•Nepal
•Cambodia
•Pakistan
•Fiji Islands
•People’s Rep. of China
•Hong Kong, China
•Philippines
•India
•Singapore
•Indonesia
•Sri Lanka
•Iran
•Taipei,China
•Lao PDR
•Thailand
•Macao
•Viet Nam
•Malaysia
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Objectives of ICP Asia Pacific
• To establish the ICP as a continuing program with a
sustained capacity & funding.
• Establish a system of comparing GDP & its
components based on purchasing power of
currencies in domestic markets.
• Establish methods & network of surveys to estimate
PPPs.
• Build capacity so ICP becomes a routine &
sustainable part of ongoing statistics.
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Short Term Objectives of
ICP Asia Pacific
• To provide international price & volume comparisons of
GDP & its component expenditures
• To mainstream ICP with national statistical work by
integrating it as far as possible with the national accounts
& price collection programs
• To support the harmonization of ICP with data collection
systems for the CPI & other prices
44
Short Term Objectives of
ICP Asia Pacific
• To assist NSOs in conducting specific surveys for collection
of additional data not covered by existing surveys
• To assist countries in identifying a comparable &
representative list of items across the countries
• To provide advisory services to NSOs as required in
carrying out the above activities
• To organize regional workshops & training
45
Strategies to Achieve
Objectives
• Development of a comprehensive & standardized
survey framework
• Regional seminars
• Regional workshops to share best practices in the
production, dissemination & use of data
• Financial assistance to enhance capacity building
46
ICP Outputs:
For GDP, its various sub-aggregates, down to each basic
heading:
• Expenditure in national currencies
• PPP in terms of a standard currency
• “Real values” in PPP terms (standard currency)
• Time series for GDP only for now; other indicators later
• Various derived statistics: price level, structure, etc
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Capacity Building of
ICP Asia Pacific
• Mainstreaming ICP with national statistical work
• Supporting the harmonization of ICP with data collection
systems for the CPI & other prices
• Assisting NSOs in conducting ICP price surveys
• Assisting countries in identifying a comparable &
representative list of items across countries
• Providing advisory services to NSOs in carrying out ICP
activities
• Organizing regional workshops & trainings
• Preparing manuals & handbooks to institutionalize ICP
methodologies in the ADB DMCs
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Thank you!
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