Definition: Rolling benchmark approach

Category: Purchasing power parities

The approach that allows PPPs and real final expenditures to be calculated annually when price collection is spread over a number of years (three in the case of Eurostat- OECD comparisons). The starting point is the complete matrix of basic heading PPPs by participating country for the reference year, t. In the subsequent year, t+1, some of the basic heading PPPs are replaced by new PPPs calculated using prices collected during t+1, while the basic heading PPPs that have not been replaced are advanced to t+1 with price indices specific to these basic headings. All the basic heading PPPs in the matrix now refer to t+1. Aggregating the matrix with expenditure weights for t+1 gives PPPs and real final expenditures for each level of aggregation up to the level of GDP with which a comparison can be made for the new reference year, t+1. By continuing the cycle of replacement, extrapolation and aggregation through t+2, t+3, t+4, etc., comparisons can be made for the reference years t+2, t+3, t+4, etc. http://ec.europa.eu/eurostat/ramon/statmanuals/files/KS-BE-06-002-EN.pdf European Union, Regulation (EC) No 1445/2007 establishing rules for the provision of basic information on PPPs, Official Journal of the European Union No L 336, 20.12.2007, p. 1 - 24