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How do you extrapolate the PPP conversion factors estimated by the ICP?

The World Development Indicators (WDI) database provides time series of PPP conversion factors for gross domestic product (GDP) and private consumption (household final consumption expenditure).

The International Comparison Program (ICP) provides PPP conversion factors for the three most recent ICP benchmark years (2011, 2017 and 2021) and years in between the benchmarks (2012-2016 and 2018-2020). For years before 2011 and after 2021, PPPs provided by the ICP are extrapolated to create a time series from 1990 to the latest year available. The method used is to apply the difference between the rate of inflation observed in the country over each period from 2011 (for years before 2011) and 2021 (for years after 2021) compared with inflation in the United States over the same period to the benchmark PPP estimates. Extrapolation for the GDP conversion factor uses the change in the GDP implicit deflator.* Extrapolation for private consumption uses the change in the consumer price index (CPI).

For example, let’s say Senegal’s CPI in 2022 divided by its CPI in 2021 is 1.096, which represents 9.6% inflation over the period; and the ratio for the US over the same period is 1.081, or 8.1% inflation. We can take Senegal’s private consumption PPP conversion factor in 2021, which was 226.6, and multiply it by 1.096/1.081 to get a 2022 conversion factor estimate of 229.7.

For the European and non-European OECD countries, we incorporate annual PPPs from the Eurostat-OECD PPP Programme, which are based on a rolling survey approach applied by the Programme. We also extend these data historically back to 1990 using our regular extrapolation method explained above, where data are not available from Eurostat-OECD Programme.

For the methodology of ICP’s PPP estimation, please refer to the ICP website. For more information on the Eurostat-OECD PPP Programme, please visit their websites on PPPs (Eurostat | OECD).

*Previously, "GDP deflator (base year varies by country)" [NY.GDP.DEFL.ZS] had been used for this purpose. However, from May 2020, we introduced "GDP deflator: linked series (base year varies by country)" [NY.GDP.DEFL.ZS.AD]) in order to have PPP conversion factor without break in series.  

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