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

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...

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Bibliographic Details
Published in:Macroeconomic dynamics 2022-03, Vol.26 (2), p.314-360
Main Authors: Balk, Bert M., Rambaldi, Alicia N., Rao, D. S. Prasada
Format: Article
Language:English
Subjects:
Economic theory
Macroeconomics
Number systems
Purchasing power parity
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Summary: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.
ISSN:1365-1005
1469-8056
DOI:10.1017/S1365100520000152