Participation in International Comparison Program (ICP)

last updated
06.Feb. 2017

The international comparison program (ICP) is an international project that was launched to make a real comparison of gross domestic product (GDP) of various countries by calculating the purchasing power parities* of the currencies.

Currency conversion based on an exchange rate is one of the general methods of international comparison, but the exchange rate poses the problem that (1) the domestic prices of non-trade commodities (e.g., education, medical, construction, government services, etc.) are not reflected in the exchange rate, and that (2) the exchange rate easily comes under the influence of speculation activities and inter-nation capital transfer. In international comparison, therefore, currency conversion based on purchasing power parity is an appropriate method because purchasing power parity is hardly affected by capital transfer and is stable. This led to the ICP project.

*Purchasing power parity (abbreviated as PPP) is a sort of conversion ratio between the currency of one country and that of another country, and is so calculated as to equalize the purchasing power of one currency (amount of goods and services that can be purchased with the currency) with that of another currency. Let's consider purchasing power parity on one commodity. When a can of beer is priced at 200 yen in Japan and at 70 cents in the United States, the purchasing power parity of the yen and dollar on beer is calculated at 1 dollar=285.7 yen (200 yen/0.7 dollars).

The ICP project was started by the United Nations Statistics Division in 1969, based on advice from the United Nations Statistical Commission. Japan has been involved in the project since the start of the third period project (for 1975), and, with the cooperation of ministries and agencies involved in the project, has been providing price data and expense weight data on survey subject articles. The project was suspended after the end of the sixth period project (for 1993), but the project implementation structure, etc., was rebuilt in following years. At present, the worldwide project for 2017 is in progress under the leadership of the World Bank.

As part of the ICP project, a purchasing power parity program with the participation of  EC member countries and OECD member countries has been implemented since 1980 under the leadership of Eurostat (Statistical Office of the European Communities) and OECD. Japan is also participating in the program, and the 2017 round survey is now in progress.

 

For further information on the Eurostat/OECD purchasing power parity program and the world project, see the OECD home page and the World Bank home page.

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