Definition: Rolling benchmark approach

Purchasing power parities

The approach that allows PPPs and real final expenditures to be calculated annually when price collection is spread over a number of years (three in the case of Eurostat- OECD comparisons). The starting point is the complete matrix of basic heading PPPs by participating country for the reference year, t. In the subsequent year, t+1, some of the basic heading PPPs are replaced by new PPPs calculated using prices collected during t+1, while the basic heading PPPs that have not been replaced are advanced to t+1 with price indices specific to these basic headings. All the basic heading PPPs in the matrix now refer to t+1. Aggregating the matrix with expenditure weights for t+1 gives PPPs and real final expenditures for each level of aggregation up to the level of GDP with which a comparison can be made for the new reference year, t+1. By continuing the cycle of replacement, extrapolation and aggregation through t+2, t+3, t+4, etc., comparisons can be made for the reference years t+2, t+3, t+4, etc.
Source:
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, 2006
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