Cover IMF Working Papers
The Hedonic Country Product Dummy Method and Quality Adjustments for Purchasing Power Parity Calculations
Author: Mick Silver
Series:
IMF Working Papers
Volume/Issue:
Volume 2009: Issue 271
Language:
English
Publication Date:
01 Dec 2009
DOI:
https://doi.org/10.5089/9781451874167.001
ISBN:
9781451874167
ISSN:
1018-5941
Pages:
28
Keywords:
WP
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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The 2005 International Comparison Program's (ICP) estimates of economy-wide purchasing power parity (PPP) are based on parity estimates for 155 basic expenditure headings, mainly estimated using country product dummy (CPD) regressions. The estimates are potentially inefficient and open to omitted variable bias for two reasons. First, they use average prices across outlets as the left-hand-side variable. Second, quality-adjusted prices of non-comparable replacements, required when products in outlets do not match the required specifications, cannot be effectively included. This paper provides an analytical framework based on panel data and hedonic CPD regressions for ameliorating these sources of bias and inefficiency.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund