World Economics

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Measuring African GDP
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Joe Downie, World Economics, June 2011
There is much speculation about the growth potential of African economies. But in the light of unreliable official statistics and the highly selective information often presented by investment companies with an incentive to highlight the positive, this article aims to provide some extra analysis to add to the recent widespread comments on high growth rates within the continent. Problems are noted with official economic data and the strengths of Purchasing Power Parity (PPP) measures for GDP comparisons are noted. GDP figures for Africa and five other major economic areas are analysed for the three decades to 2010 in terms of GDP growth and GDP level by decade. These figures are then viewed in per capita terms, drawing attention to significant population growth within the continent, and therefore less impressive per capita figures. A closer look at the location and distribution of economic activity within the African continent highlights the high concentration of economic activity within a small number of countries. However, it is concluded that the future prospects for African growth are still generally positive. Despite the heavy reliance on oil exports in some countries, headline GDP figures also reflect incidences of broad-based growth which looks set to continue so long as Asian demand remains high and good economic policies are pursued.
Maddison and Wu: ‘Measuring China’s Economic Performance’
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Yuri Dikhanov & Eric V. Swanson, World Economics, March 2010
Angus Maddison and Harry Wu (2008) claim that, in 2003, China’s GDP was 73% of that of the United States on a purchasing power parity (PPP) basis. Rejecting the results of the 2005 International Comparison Program (ICP), they construct their own PPP using a 1986 GDP estimate for China (Ren & Chen 1995) which they adjust upwards, and then extrapolate to 2003 using their revised growth rates for China, which they adjust downwards. This note examines the validity of their adjustments and assumptions, and finds them to be inconsistent with recommendations both from the perspective of index number theory and recommended national accounting practices. The 2005 PPP estimates from the ICP, which Maddison and Wu reject, produce a more plausible estimate of the size of China’s economy relative to that of the US (43% in 2005).
International Comparisons of GDP
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Elio Lancieri, World Economics, September 2008
The recent publication by the World Bank of PPP-GDP estimates for 2005, referred to 146 countries, seems a good occasion to reopen the long-standing debate on the use of Purchasing Power Parities. While theoretical speculations on the subject have continued, no estimates were supplied for more than a decade. The author’s alternative method for GDP estimation is based on inflationadjusted long-term exchange rates, where real GDP estimates are obtained through simultaneous equations. He describes the method in the light of his experience and compares its results for 100 countries with both ICP estimates and GDPs at exchange rates.
Measuring China’s Economic Performance
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Andreas (Andy) Jobst & Harry X. Wu, World Economics, June 2008
China is the world’s fastest growing economy and is also the second largest. However, the official estimates of the Chinese National Bureau of Statistics exaggerate GDP growth and need adjustment to conform to international norms as set out in the 1993 System of National Accounts (SNA). This paper presents and discusses the necessary adjustments. The two major contributions are new volume indices for the industrial sector and for "non-material" services. Finally, in order to measure the level of Chinese GDP in internationally comparable terms, the authors use a measure of purchasing power parity (PPP) instead of the exchange rate.
From Big Macs to iMacs
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Jonathan Haskel & Holger Wolf, World Economics, June 2000
The authors review recent international price comparisons to examine the veracity of claims about “rip-off Britain”. They reach three conclusions. First, methodologically, the data requirements for a meaningful price comparison are very demanding and most of the evidence does not meet these standards. Second, price differences within countries seem, in many cases, to be just as high if not higher than price differences between countries. Third, for most goods, the difference between the UK and the rest of the EU seems to be minor relative to the difference between the EU and the United States. The real puzzle is the comparatively high prices in the EU.

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