1. 1 A B C D E Region 1 Region 2 1 2 RING Regional Comparison BH p/PPPs

2. 2 A B CD E Region 1 Region 2 1 2 RING Ring Comparison GDP PPP

3. 3 Regional Comparison 1.Input: item prices (p) for all countries in region 2.Output: basic heading PPP for each country –Relative to one base country or –Relative to average of all countries 3.Divide ring country item prices by the basic heading PPP –Region 1 ring country prices = (p/PPP) AB CD Region 1

4. 4 Ring comparison 1.Input: Region 1 ring country prices (p/PPP), and same for all other ring countries. 2.Output: GPD PPP for each region - Relative to one base region or - Relative to average of all regions 3.Multiply country PPPs by regional PPPs - PPPs (country) x PPP (region) = PPP global Either at Basic Heading level or GDP level for the country PPPs 1 2 RING

5. 5 Example: Basic Heading = Shoes

6. 6 Find prices relative to a base country and then the country PPPs (unweighted geometric mean in this example)

7. 7 Same for Fruit (2nd Basic Heading) Aggregate country PPPs within Regions can be calculated (even before Ring comparison):

8. 8 Divide BH prices by BH PPPs = (p / PPP) keeping only SPDs that are in RING comparison (eg drop Casual shoes, keep Sandals)

9. 9 Repeat procedure done previously,but now find prices relative to base region and regional PPPs

10. 10 Fruit (2nd Basic Heading) Unweighted Aggregate geomean is calculated. Equals the regional PPP or factor.

11. 11 To Find the Global PPPs The aggregate (food+fruit) PPP in this example, is a regional factor. 1) Use this factor to multiply country-specific prices and find the aggregate PPP for each country. OR 2) Find the aggregate PPP for each country first, then multiply by the factor. Both will yield the same relative global PPPs. (In other words, within-region relationships are preserved.)

12. 12 1) Multiply country PPPs times the regional PPP factor from Ring Find the Aggregate PPP = Geometric Mean

13. 13 OR 2) multiply aggregate country PPPs (slide 7) times the factor