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  4. October 2020
  5. Shining a Light on Purchasing Power Parities

Shining a Light on Purchasing Power Parities

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Abstract

We use satellite-recorded nighttime lights as an independent benchmark of economic activity in order to generate three findings in the study of PPP-adjusted estimates of GDP. First, PPP-adjusted estimates better describe poor economies than do market exchange rate-based estimates today, although this was not the case in the late 1990s. Second, estimates of PPPs have been steadily improving from one price survey round to the next. Third, it has tended to be optimal to only use the latest price data and to revise existing PPP-adjusted estimates whenever a new price survey is released.

Citation

Pinkovskiy, Maxim, and Xavier Sala-i-Martin. 2020. "Shining a Light on Purchasing Power Parities." American Economic Journal: Macroeconomics, 12 (4): 71-108. DOI: 10.1257/mac.20190037

Additional Materials

JEL Classification

  • E23 Macroeconomics: Production
  • E31 Price Level; Inflation; Deflation
  • F31 Foreign Exchange
  • O11 Macroeconomic Analyses of Economic Development
  • O57 Comparative Studies of Countries
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