The conventional approach of converting the values of Gross Domestic Product (GDP) and other expenditure aggregates into a common currency by means of market exchange rates does not produce statistics suitable for comparisons across economies. This is because market exchange rates may over- or under-estimate the domestic price levels, especially for those goods and services not traded between economies. The International Comparison Program (ICP) aims at producing a set of Purchasing Power Parities (PPPs) which would enable meaningful volume comparisons of GDP and other expenditure aggregates among different economies. Results of the 2005 ICP have recently been released by the World Bank.
This article aims to introduce the methodology of the ICP and provides some highlights on the preliminary results for the 2005 ICP.