1. Subnational PPP toward Integration of ICP and CPI: The Case of the Philippines Yuri Dikhanov
3rd Regional Coordinating Agencies meeting
October 28-30, 2015 Washington, DC

2. Outline of Presentation
Rationale for Subnational PPP
Objectives
ICP and CPI: The Link
Analysis of Price Levels Across Regions in the Philippines: The PPP Approach
Data Requirements
Estimation Methodology
Major Results
Issues and Limitations

3. Rationale for Subnational PPP
Key element for achieving sustainability of the ICP and its gradual integration in the regular price collection particularly the CPI :
Advocate construction and use of PPP at national level
sub national poverty levels
sub-national price levels
Use CPI information for sub-national PPP compilation

4. Rationale for Subnational PPP
Main Advantage
No additional data collection
Otherwise, another set of comparable set of data maybe collected to reflect target population (e.g. spending of the poor, etc. )

5. ICP and CPI: The Link Apply ICP concepts to CPI Information
Spatial (ICP) comparability across space
Temporal (CPI)comparability across time
The Link
Apply ICP concepts to CPI Information
Calculate subnational PPPs
Directly compare regions and states within country across time

6. Analysis of Price Levels Across Regions in the Philippines: The PPP Approach
Objective
Explore the possibility of comparing regional price levels for the 17 major regions in the Philippines by applying the PPP concepts s
Study how the derived subnational PPPs can be used to adjust the collected price levels for the 2009 PPP Updates to reflect national average price levels

7. Analysis of Price Levels Across Regions in the Philippines: The PPP Approach
Data Requirements
Expenditure Weights from Household Expenditure Survey (which is the same as the ones used for calculating CPI at the aggregated level)
Average Prices for each variety by Region/Province from CPI price collection

8. Established Coding System (Country or International)
Analysis of Price Levels Across Regions in the Philippines: The PPP Approach
Specific Data requirements  
Established Coding System (Country or International)
Prices for exactly the same products
Geographic Coverage: Depends on Study (could be provincial, regional, city, etc.)
Expenditure weights based on target aggregation level and should coincide with target groupings or geographic coverage

9. Estimation Methodology
Step 1 – Consolidate price and expenditure data by region/province
Step 2 – Construct/Build-up Database
Step 3 – Determine total number of varieties by specified item codes
Step 4 – Identify variety overlaps and select varieties that are priced by at least two regions/provinces
Step 5 – Data editing and validation
Intra-region/province
Inter-region/province
Step 6 – PPP Calculation
By 2-Digit Code
By Higher Level Aggregates (Major Groups)

10. Estimation Methodology
Main Aggregates
Food, Beverages and Tobacco
Clothing and Footwear (CFW)
Housing And Repairs (HH)
Fuel, Light and Water (FLW)
Services (Srvs)
Miscellaneous (Misc)

11. Estimation Methodology
Aggregation Methods:
CPD – 2-digit level
Aggregate level
Weighted geometric mean – total Philippines

12. Estimation Methodology
Lower Level (2-Digit Codes) Aggregates
Cereal And Cereal Preparation
Dairy Products
Eggs
Fish
Fruits And Vegetables
Meat
Miscellaneous Foods
Beverages
Tobacco

13. Estimation Methodology
Lower Level (2-Digit Codes) Aggregates (cont’d)
Footwear
Ready-Made Apparel Except Footwear
Custom Clothes (Accesories And Services)
Minor Repairs
Rentals
Fuel
Light
Water

14. Estimation Methodology
Lower Level (2-Digit Codes) Aggregates (cont’d)
Educational Services
Medical Services
Personal Services
Recreational Services
Transportation And Communication
Other Services
Household Furnishing And Equipment
Household Operations
Personal Care And Effects
Other Miscellaneous Goods

15. Major Results
Estimated Quarterly Price Indexes versus Official Consumer Price Index, 2005–2010

16. Major Results
Personal Consumption Expenditure Quarterly Regional Price Index, 2005–2010

17. Food, Beverages, and Tobacco Quarterly Regional Price Index, 2005-2010
Major Results
Food, Beverages, and Tobacco Quarterly Regional Price Index,

18. Nonfood Items Quarterly Regional Price Index, 2005-2010
Major Results
Nonfood Items Quarterly Regional Price Index,

19. Clothing and Footwear Quarterly Regional Price Index, 2005-2010
Major Results
Clothing and Footwear Quarterly Regional Price Index,

20. Housing and Repairs Quarterly Regional Price Index, 2005-2010
Major Results
Housing and Repairs Quarterly Regional Price Index,

21. Fuel, Light and Water Quarterly Regional Price Index, 2005-2010
Major Results
Fuel, Light and Water Quarterly Regional Price Index,

22. Services Quarterly Regional Price Index, 2005-2010
Major Results
Services Quarterly Regional Price Index,

23. Miscellaneous Items Quarterly Regional Price Index, 2005-2010
Major Results
Miscellaneous Items Quarterly Regional Price Index,

24. Issues and Limitations
Elementary aggregation is conducted at the 2-digit level.
Incorporating weights for 2006 and 2009 in the calculation, and estimating the weights for remaining years through interpolation, are intended.
More work is needed in order to explain the factors of differences between the ADB calculation and official CPI.
Regional price movements are highly correlated, however, substitution effects is yet to be studied.