Definition: International prices

Purchasing power parities

A term used in association with additive aggregation methods. In the course of expressing the expenditures in a common currency and at a uniform price level, additive aggregation methods value the expenditures at international prices, where an international price is defined as the average of the national prices prevailing in participating countries. The average may be weighted or unweighted, PPP (Purchasing power parity) adjusted or unadjusted. It may be an average of prices or an average of price structures. In the GK method (Geary-Khamis method), for example, the average is defined as a quantity-weighted arithmetic average of the national prices adjusted by the global PPPs across all countries. Theoretically prices for products should be used to calculate the international prices, but in practice notional prices for basic headings are used instead.
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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