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MACRO-ECONOMIC MEASURES FOR A GLOBALIZED WORLD: GLOBAL GROWTH AND INFLATION

Published online by Cambridge University Press:  09 June 2020

Bert M. Balk ,
Alicia N. Rambaldi  and
D. S. Prasada Rao
Bert M. Balk*
Affiliation:
Rotterdam School of Management, Erasmus University
Alicia N. Rambaldi
Affiliation:
School of Economics, The University of Queensland
D. S. Prasada Rao
Affiliation:
School of Economics, The University of Queensland
*
Address correspondence to: Bert M. Balk, Anna Paulownalaan 79, 3818 GC Amersfoort, the Netherlands. e-mail bbalk@rsm.nl.
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Abstract

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This paper offers a framework for measuring global growth and inflation, built on standard index number theory, national accounts principles, and the concepts and methods for international macro-economic comparisons. Our approach provides a sound basis for purchasing power parity (PPP)- and exchange rate (XR)-based global growth and inflation measures. The Sato–Vartia index number system advocated here offers very similar results to a Fisher system but has the added advantage of allowing a complete decomposition with PPP or XR effects. For illustrative purposes, we present estimates of global growth and inflation for 141 countries over the years 2005 and 2011. The contribution of movements in XRs and PPPs to global inflation are presented. The aggregation properties of the method are also discussed.

Keywords

International ComparisonWorld GrowthWorld InflationExchange RatePurchasing Power ParityIndex Number Theory
Type
Articles
Information
Macroeconomic Dynamics , Volume 26 , Issue 2 , March 2022 , pp. 314 - 360
Creative Commons
Creative Common License - CCCreative Common License - BY
This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted re-use, distribution, and reproduction in any medium, provided the original work is properly cited.
Copyright
© Cambridge University Press 2020

Footnotes

Rambaldi and Rao gratefully acknowledge funding support from the Australian Research Council through DP0986813 and DP170103559. This paper is essentially based on Rao et al. (2015) and uses additional material from Rao (2018). Two referees are thanked for useful criticism.

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