A Practical Approach to choosing Formulae for Economic Index Numbers

Traditional axiomatic, economic and stochastic approaches to choosing a formula for economic index numbers are based on theoretical considerations, with little regard to whether they reflect the actual circumstances affecting the markets to which they relate. This paper presents an approach to index number formulation based on how markets operate and presents a general, parameter-based formula for price and quantity indices. Two variants of this general formula cater for the “substitution effect” in different ways and one of these variants provides a practical expression for an economic-theoretic index based on purchasers' revealed preferences. Another variant applies this approach to short-term inflation indices. A final variant provides a straightforward means of estimating purchasing power parities for spatial indices. The analysis also emphasises the importance in National Accounts of using coherent price and quantity indices, whose products generate the corresponding value indices.

Subnational Purchasing Power Parities as a Tool for the Interarea Comparison

The author describes the key characteristics of domestic and foreign experience in the development of conceptual and methodological foundations for the construction of subnational purchasing power parities. The relevance of the topic is explained, in particular, by the fact that subnational purchasing power parities are one of the key tools of the interarea comparison analysis. This causes the expanding attention paid by the national statistical ofces to its compilation and the development of the corresponding methodology. Thus, in July 2021, the World Bank as the Global ICP coordinator published two important guides presenting the international standards for producing purchasing power parities – for developing subnational PPPs and for integrating PPPs and CPI production activities.The international standards recommend considering the sum of expenditures on fnal consumption and gross fxed capital formation as the aggregated regional indicator in interarea PPP-based comparisons. A narrower indicator – household fnal consumption – can also be used depending on the purposes of further analysis; household budget survey data provide weights in comparing the consumer prices. Producing subnational PPPs is closely linked with assessing the spatial adjustment factors, which can provide an important tool in computing the national PPPs.Bearing in mind that producing subnational PPPs is a labor-intensive process, which includes all work stages (price data collection and validation, forming the weights system, computations, ensuring a balanced presentation of regions), the international standards suggest focusing on the annual frequency of works.Integrating the production of subnational PPPs with the CPI calculations system is one of the key factors for ensuring the efciency of the whole work.

EU fiscal policy effectiveness can be better shown

Significance Measures of AIC per capita at purchasing power parities (PPS) show goods and services consumed by households and individuals, an indication of their material welfare. Some of the EU-11 were by this measure on a par with southern Europe, but five have AIC levels well below the EU average. Impacts Governments will continue to measure their success both by GDP growth but also by reducing poverty and inequality. AIC measures have significant potential as a tool for fine-tuning regional and cohesion policies. More detailed data could clarify which parts of government and not-for-profit spending affect households most. Current geographical hierarchies within the EU may be shifting.