Definition: Price similarity index

Category: Purchasing power parities

The similarity of the structure of prices between any pair of countries is measured by the correlation coefficient that is obtained by regressing the internal price structure of one country against the corresponding internal price structure of the other country. Internal price structures can be expressed as a vector of the ratios of product prices to the price of a reference product. In practice, the correlation coefficient is obtained by regressing the basic heading PPPs (Purchasing power parities). The basic heading PPPs are interpreted as notional prices. http://ec.europa.eu/eurostat/product?code=KS-RA-12-023&mode=view Eurostat and Organization for Economic Cooperation and Development (OECD), "Eurostat - OECD Methodological manual on purchasing power parities (2005 Edition)", Methods and Nomenclatures, Office for Official Publications of the European Communities, Luxembourg, 2006European Union, Regulation (EC) No 1445/2007 establishing rules for the provision of basic information on PPPs, Official Journal of the European Union No L 336, 20.12.2007, p. 1 - 24