Definition: Characteristicity

Category: Purchasing power parities

A country’s PPPs (Purchasing power parities) in a multilateral comparison are influenced by the data of all countries participating in the comparison. Characteristicity requires that the country’s multilateral PPPs should reflect the essential features of the structure of its input data. Characteristicity in multilateral methods, such as the EKS (Eltetö-Köves-Szulc method), that are based on the averaging of the binary PPPs is the property that the resulting multilateral PPPs differ as little as possible from the original binary PPPs. Characteristicity in multilateral methods, such as the CPD (Country-product-dummy method) or GK (Geary-Khamis method), that are based on average international prices is the property that the structure of the average international prices is close as possible to the price structure of the country. The extent to which characteristicity can be obtained depends on the degree of homogeneity among the price structures of the group of countries being compared (2012 Methodological manual on purchasing power parities).

The property that requires transitive multilateral comparisons between members of a group of countries to retain the essential features of the intransitive binary comparisons that existed between them before transitivity. A transitive multilateral comparison between a pair of countries is influenced by the price and quantity data of all other participating countries. Characteristicity requires that the impact of these influences should be kept to a minimum when they are introduced into the intransitive binary comparison. In other words, the multilateral PPP between two countries should deviate as little as possible from their binary PPP (2005 Methodological manual on purchasing power parities). http://ec.europa.eu/eurostat/product?code=KS-RA-12-023&mode=view Eurostat and Organization for Economic Cooperation and Development (OECD), "Eurostat - OECD Methodological manual on purchasing power parities (2005 Edition)", Methods and Nomenclatures, Office for Official Publications of the European Communities, Luxembourg, 2006European Union, Regulation (EC) No 1445/2007 of the European Parliament and of the Council of 11 December 2007 establishing common rules for the provision of basic information on Purchasing Power Parities and for their calculation and dissemination, Official Journal of the European Union No L 336, 20.12.2007, p. 1 - 24