The ICP is the world's largest global statistical initiative for estimating purchasing power parities (PPPs) to compare economic outputs, standards of living, and relative price levels across economies.
The ICP entails estimating PPPs and related macro-economic aggregates of economies for comparison. The World Bank coordinates global-level ICP, while ADB covers the program’s Asia and the Pacific component.
The purchasing power parity (PPP) is the amount of currency units required to purchase a basket of goods and services that can be purchased with one unit of the reference economy’s currency.
The most celebrated example of a PPP based on a single commodity is the Big Mac Index published by The Economist magazine. Suppose the price in baht (B) for Big Mac in Thailand is B128.00 and in Hong Kong, China is HK$21.00. This means that the Big Mac PPP for Thailand is:
$$ \mathrm{Big \ Mac \ PPP \ {_B}{_,}{_H}{_K}{_$} = {B128.00 \over HK$ 21.00} = B6.10 \ per \ HK$1} $$
Meaning, B6.10 has the same purchasing power as one unit of Hong Kong dollar in Big Mac terms. Being a ratio of two currency units, PPP acts as a currency converter; unlike exchange rate, PPP accounts for relative price levels of commodities. Hence, an expenditure converted to a reference currency using PPP becomes a measure of the volume of commodities that can be purchased—hence, called real expenditure.
The PPPs can also be compared against exchange rate and their ratio is called price level index (PLI). Suppose the exchange rate is B4.11 = HK$1, then PLI is:
$$ \mathrm{Big \ Mac \ PLI \ {_B}{_,}{_H}{_K}{_$} = {B6.10 \ per \ HK$1 \over B4.11 \ per \ HK$1} \times 100 = 148} $$
Meaning, the price for Big Mac in Thailand is 48% higher than the price of Big Mac in Hong Kong, China. Note, however, that the Big Mac PPP is of limited use because the Big Mac does not represent consumption baskets in Thailand nor Hong Kong, China. So, a PPP more relevant to policy would relate to the household consumption basket, or even the expenditure of the entire economy as measured by gross domestic product (GDP).
The main role of the International Comparison Program (ICP) is to estimate PPPs, PLIs, and real expenditures relevant to the entire GDP, as well as its components such as individual consumption expenditure by households (ICEH), actual individual consumption by households (AICH), government final consumption expenditure (GFCE), and gross fixed capital formation (GFCF).
The amount of currency units required to purchase a common basket of goods and services in an economy that can be purchased with one unit of the reference currency in the reference economy.
The ratio of PPPs to exchange rates with respect to a common currency. PLI expresses the general price level in an economy as percentage of reference economy's price level.
Expenditure in local currency units converted into a common currency unit using purchasing power parities.
Expenditure in the currency units of an economy converted to a common currency using the exchange rate of a reference economy.
Total expenditure divided by the total population of a given economy or the reference geography. Per capita expenditure measures standard of living in an economy. This can be expressed either in real or nominal terms.
An important property of PPP whereby the direct PPP between any two economies yields the same result as an indirect comparison via any other economy.
The property whereby the relativities between the PPPs, PLIs, and volume indexes of economies are not affected by either the choice of currency as numeraire or the choice of reference economy.
When estimated from the expenditure side, the total value of the final consumption expenditures of households, nonprofit institutions serving households, and government plus gross capital formation plus the balance of exports and imports.
The ICP is the world's largest global statistical initiative for estimating purchasing power parities (PPPs) to compare economic outputs, standards of living, and relative price levels across economies.
View ICP governance
These present the ICP reports and related research presenting methodologies and results of purchasing power parities (PPPs) across various ICP cycles in Asia and the Pacific and related research such as studies on poverty-specific PPPs, integrating ICP with the Consumer Price Index as a framework for subnational PPPs, and alternative approaches for estimating PPPs for non-benchmark years in the region.
ICP Reports and ResearchGuide on the Integration of CPI and ICP Activities
ICP COVID-19 Guidance Note on Price Surveys
ICP COVID-19 Guidance Note on National Accounts
Expenditure Data
