Definition: Inter-country validation

Purchasing power parities

The validation that takes place after participating countries have completed their intra-country validation and submitted their survey prices to Eurostat or the OECD. It is an iterative process consisting of several rounds of questions and answers between Eurostat or the OECD and participating countries. It involves editing and verifying the average survey prices reported by participating countries for a basic heading and assessing the reliability of the PPPs (Purchasing power parities) they produce for the basic heading. The objective is to establish that the average survey prices are for comparable products, that the products have been accurately priced and that the allocation of representativity indicators is correct. In other words, to ascertain whether countries have interpreted the product specifications the same way and whether their price collectors have priced them without error. The Quaranta editing procedure is employed for this purpose. The procedure entails comparing the average survey prices recalculated in a common currency by the exchange rates as well as by the basic heading PPPs for the same product across countries and analysing across products and across countries the dispersion of the price ratios that the average survey prices generate between countries. Outliers among the average survey prices are detected by identifying the outliers among the corresponding price ratios. Countries verify the outliers found to ascertain whether or the not they are valid observations. If they are not, the country either corrects or suppresses them.
Source:
Eurostat, Organization for Economic Cooperation and Development (OECD), "Eurostat-OECD Methodological Manual on Purchasing Power Parities", Publications Office of the European Union, Luxembourg, 2012
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