How reliable are purchasing power parities from the World Bank?
The international Comparison Program (ICP) at the World Bank regularly compiles and publishes estimates of purchasing power parities (PPPs) of currencies and real incomes. ICP results are used for: study of global inequality and poverty; macroeconomic analysis; the Human Development Index; and cross-country productivity comparisons. However, no estimates of reliability associated with ICP PPPs are currently available. The current project seeks to bridge this gap by providing an econometric framework to estimate PPPs and a method to compute standard errors associated with ICP PPPs. Results from this project are likely to impact on widely used data sets such as the Penn World Tables and the UQ International Comparison Database (UQICD).