Hostname: page-component-cd9895bd7-gbm5v Total loading time: 0 Render date: 2024-12-28T16:31:53.608Z Has data issue: false hasContentIssue false
  • English
  • Français

MACRO-ECONOMIC MEASURES FOR A GLOBALIZED WORLD: GLOBAL GROWTH AND INFLATION

Published online by Cambridge University Press:  09 June 2020

Bert M. Balk ,
Alicia N. Rambaldi  and
D. S. Prasada Rao
Bert M. Balk*
Affiliation:
Rotterdam School of Management, Erasmus University
Alicia N. Rambaldi
Affiliation:
School of Economics, The University of Queensland
D. S. Prasada Rao
Affiliation:
School of Economics, The University of Queensland
*
Address correspondence to: Bert M. Balk, Anna Paulownalaan 79, 3818 GC Amersfoort, the Netherlands. e-mail bbalk@rsm.nl.
Rights & Permissions [Opens in a new window]

Abstract

Core share and HTML view are not available for this content. However, as you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

This paper offers a framework for measuring global growth and inflation, built on standard index number theory, national accounts principles, and the concepts and methods for international macro-economic comparisons. Our approach provides a sound basis for purchasing power parity (PPP)- and exchange rate (XR)-based global growth and inflation measures. The Sato–Vartia index number system advocated here offers very similar results to a Fisher system but has the added advantage of allowing a complete decomposition with PPP or XR effects. For illustrative purposes, we present estimates of global growth and inflation for 141 countries over the years 2005 and 2011. The contribution of movements in XRs and PPPs to global inflation are presented. The aggregation properties of the method are also discussed.

Keywords

International ComparisonWorld GrowthWorld InflationExchange RatePurchasing Power ParityIndex Number Theory
Type
Articles
Information
Macroeconomic Dynamics , Volume 26 , Issue 2 , March 2022 , pp. 314 - 360
Creative Commons
Creative Common License - CCCreative Common License - BY
This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted re-use, distribution, and reproduction in any medium, provided the original work is properly cited.
Copyright
© Cambridge University Press 2020

Footnotes

Rambaldi and Rao gratefully acknowledge funding support from the Australian Research Council through DP0986813 and DP170103559. This paper is essentially based on Rao et al. (2015) and uses additional material from Rao (2018). Two referees are thanked for useful criticism.

References

Balk, B. M. (2002/2003) Ideal indices and indicators for two or more factors. Journal of Economic and Social Measurement 28, 203–217.CrossRefGoogle Scholar
Balk, B. M. (2008) Price and Quantity Index Numbers: Models for Measuring Aggregate Change and Difference. New York: Cambridge University Press.CrossRefGoogle Scholar
Balk, B. M. (2009) Aggregation methods in international comparisons: An evaluation. In: Rao, D. S. P. (ed.), Purchasing Power Parities: Recent Advances in Methods and Applications. Cheltenham UK, Northampton MA: Edward Elgar.Google Scholar
Balk, B. M. (2010) An assumption-free framework for measuring productivity change. The Review of Income and Wealth 56, S224–S256.CrossRefGoogle Scholar
Cicarelli, M. and Mojon, B. (2010) Global inflation. The Review of Economics and Statistics 92, 524–535.CrossRefGoogle Scholar
Deaton, A. and Aten, B. (2017) Trying to understand the PPPs in ICP 2011: Why are the results so different? American Economic Journal: Macroeconomics 9, 243–264.Google Scholar
Deaton, A. and Heston, A. (2010) Understanding PPPs and PPP-based national accounts. American Economic Journal: Macroeconomics 2, 1–35.Google Scholar
Diewert, W. E. (2013) Methods of aggregation above the basic heading level within regions. In: Bank, World (ed.), Measuring the Real Size of the World Economy, Chapter 6, pp. 169–196. Available at: https://elibrary.worldbank.org/doi/10.1596/9780821397282_CH06.CrossRefGoogle Scholar
Diewert, W. E. and Fox, K. J. (2017) Output growth and inflation across space and time. Eurona 1, 7–40. Addendum in Eurona (2018) 2, 71–80.Google Scholar
Feenstra, R. C. (1994) New product varieties and the measurement of international prices. The American Economic Review 84, 157–177.Google Scholar
Feenstra, R. C., Inklaar, R. and Timmer, M. P. (2015) The next generation of the Penn World Table. The American Economic Review 105, 3150–3182. Available at: www.ggdc.net/pwt.CrossRefGoogle Scholar
Feenstra, R. C., Ma, H., Neary, J. P. and Rao, D. S. P. (2013) Who Shrunk China? Puzzles in measurement of Real GDP. Economic Journal 123, 1100–1129.CrossRefGoogle Scholar
Gillitzer, C. and McCarthy, M. (2019) Does global inflation help forecasting inflation in industrialized countries? Journal of Applied Econometrics 34, 850–857.CrossRefGoogle Scholar
Huber, F., Fischer, M. and Piribauer, P. (2019) The role of US-based FDI flows for global output dynamics. Macroeconomic Dynamics 23, 943–973.CrossRefGoogle Scholar
Inklaar, R. and Rao, D. S. P. (2017) Cross-country income levels over time: Did the developing world suddenly become much richer? American Economic Journal: Macroeconomics 9, 265–290.Google Scholar
Inklaar, R. and Timmer, M. P. (2014) The relative price of services. The Review of Income and Wealth 60, 727–746.Google Scholar
Jorgenson, D. W. and Schreyer, P. (2013) Industry-level productivity measurement and the 2008 system of national accounts. The Review of Income and Wealth 59, 185–211.CrossRefGoogle Scholar
Kohli, U. and Natal, J.-M. (2014) The real exchange rate and the structure of aggregate production. Journal of Productivity Analysis 42, 1–13.CrossRefGoogle Scholar
Majumder, A., Ray, R. and Sinha, K. (2015) Spatial comparisons of prices and expenditure in a heterogeneous country: Methodology with application to India. Macroeconomic Dynamics 19, 931–989.CrossRefGoogle Scholar
Monacelli, T. and Sala, L. (2009) The international dimension of inflation: Evidence from disaggregated consumer price data. Journal of Money, Credit and Banking 41, 101–120.CrossRefGoogle Scholar
Mumtaz, H. and Surico, P. (2012) Evolving international inflation dynamics: World and country-specific factors. Journal of the European Economic Association 10, 716–734.CrossRefGoogle Scholar
OECD (2011) Aggregation Methods. Available at: http://www.oecd.org/economy/outlook/aggregationmethods.htm (Accessed on November 22, 2019).Google Scholar
Rao, D. S. P. (2013) The framework of the international comparison program. In: Bank, World (ed.), Measuring the Real Size of the World Economy, Chapter 1, pp. 13–45. Available at: https://elibrary.worldbank.org/doi/10.1596/9780821397282_CH01.CrossRefGoogle Scholar
Rao, D. S. P. (2018) Macro-economic Measures for a Globalised World: Global Growth and Inflation. Working Papers: No. 2018-11, Center for Economic Institutions, Hitotsubashi University.Google Scholar
Rao, D. S. P. and Balk, B. M. (2013) Concepts and terminology for international comparisons of prices and real incomes. Paper presented at the Ottawa Group Meeting on Price Statistics, Copenhagen, 1–2 May 2013. Available at: www.ottawagroup.org.Google Scholar
Rao, D. S. P and Rambaldi, A. N. (2013) A state-space and constrained GEKS approach to the construction of panels of real incomes at current and constant prices. Paper presented at the Princeton Conference on ICP/PPP, 23–24 May 2013. Available at: www.irs.princeton.edu/events/international-comparisons-conference-pppicp.Google Scholar
Rao, D. S. P., Rambaldi, A. N. and Balk, B. M. (2015) On Measuring Regional or Global Growth and Inflation. Discussion Papers: No. 552, School of Economics, The University of Queensland.Google Scholar
Rao, D. S. P., Rambaldi, A. N., Ganegodage, K. R., Huynh, L. T. and Doran, H. E. (2017) UQICD v2.1.2 – User Guide. Discussion Papers: No. 534, School of Economics, The University of Queensland.Google Scholar
Reich, U.-P. (2013) PPPs for SDRs? Some theoretical observations on how to normalise, capture the dynamics, and extend the application of, global purchasing power parities. Journal of Economic and Social Measurement 38, 171–185.CrossRefGoogle Scholar
Samuels, J. D. and Strassner, E. H. (2019) Toward a global integrated industry-level production account: A proposal. International Productivity Monitor 36, 7–33.Google Scholar
Sato, K. (1976) The ideal log-change index number. The Review of Economics and Statistics 58, 223–228.CrossRefGoogle Scholar
Vartia, Y. O. (1976) Ideal log-change index numbers. The Scandinavian Journal of Statistics 3, 121–126.Google Scholar
Ward, M. (2001) International price levels and global inflation. Statistical Journal of the United Nations Economic Commission for Europe (continued as Statistical Journal of the IAOS) 18, 65–75.Google Scholar
World Bank (2008) Global Purchasing Power Parities and Real Expenditures 2005. International Comparison Program. The World Bank, Washington DC. Available at: http://documents.worldbank.org/curated/en/842221468166145357/pdf/451960REPLACEM0me0box0info00PUBLIC0.pdf.Google Scholar
World Bank (2013) Measuring the Real Size of the World Economy: The Framework, Methodology, and Results of the International Comparison Program ICP. Washington, DC: World Bank. doi:10.1596/978-0-8213-9728-2. License: Creative Commons Attribution CC BY 3.0. Available at: http://pubdocs.worldbank.org/en/927971487091799574/ICPBook-eBook-FINAL.pdf.Google Scholar
World Bank (2015) Purchasing Power Parities and Real Expenditures of World Economies: Summary of Results and Findings of the 2011 International Comparison Program. Washington DC: The World Bank. Available at: http://pubdocs.worldbank.org/en/150971487105181565/Summary-of-Results-and-Findings-of-the-2011-International-Comparison-Program.pdf.Google Scholar