Definition: Gerardi method

Purchasing power parities

The average price aggregation method used in the 1975 Eurostat comparison of EU Member States. International prices are calculated as the geometric mean of the national prices of participating countries expressed in national currencies. When a geometric mean is used, the pattern of relative average prices is the same whether or not the national prices are converted into a common currency. It avoids the problem of calculating PPPs (Purchasing power parities) with which to convert national prices to a common currency before averaging them. Gerardi real expenditures are additive and all countries, both small and large, are treated symmetrically.