12 Mar 2018Working Paper Summaries

Using Online Prices for Measuring Real Consumption Across Countries

by Alberto Cavallo, W. Erwin Diewert, Robert C. Feenstra, Robert Inklaar, and Marcel P. Timmer

The increasing availability of big data can improve measurement of real consumption in closer to real time. This study shows that online prices may enhance data of the International Comparisons Program, dramatically improving the frequency and transparency of purchasing power parities compared with traditional data collection methods.

Author Abstract

We show that online prices can be used to construct quarterly purchasing power parities (PPPs) with a closely matched set of goods and identical methodologies in a variety of developed and developing countries. Our results are close to those reported by the International Comparisons Program (ICP) in 2011 and the OECD in 2014 and can be used to obtain more up-to-date estimates of real consumption across countries without the need for consumer price index extrapolations. We discuss advantages and limitations associated with the use of online prices for PPPs, including issues of representativeness and limited coverage of product categories and countries.