Definition: Ikle method

Category: Purchasing power parities

An average price aggregation method similar to the GK method (Geary-Khamis method). It was used in the 2005 ICP (International comparison programme) regional comparison for Africa. Like the GK method, it derives a vector of international prices by averaging national prices across participating countries after the prices have been converted to a common currency with PPPs (Purchasing power parities) and weighted. The GK method uses quantity shares as weights. The Ikle method uses expenditure shares as weights. In addition, GK international prices are arithmetic means while Ikle international prices are harmonic means. The Ikle method is designed to prevent prices in countries with large expenditures dominating the average prices. Because the sum of expenditure shares in each country is equal to one, the Ikle method can be regarded as being equi-representative of all countries. The Iklé method produces PPPs that are transitive and real expenditures that are additive. Compared to the GK method, the Iklé method minimises the Gerschenkron effect. http://ec.europa.eu/eurostat/product?code=KS-RA-12-023&mode=view