Syndicate content

Add new comment

Submitted by Sasha on

Just to add.

One of the reasons that proponents of PPP use is that exchange rates are inherently volatile. But ask yourself this: if India's economy "shrank" by a stunning 40% using the 2005 ICP standards, how is that stable? And who says that if they increase their GDP by 40% this time, that the new standard is accurate?
Or take Vietnam whose economy "shrank" by 40%.

Exchange rates are problematic, see the so-called 'Penn effect', but this is why the Atlas method is better(but still very imperfect) as it measures GNI(Gross National Income) per capita with a smoothed 3 year exchange rate.

All of which goes to show just how unstable the economic business really is. If a country's GDP can increase by 40% or 20% just by a flip of a switch - and we still are not sure if that is even accurate - then it tells you how far we still have to go.