On a Gerardi Alternative for the Geary-Khamis Measurement of International Purchasing Powers and Real Product

Abstract

This paper briefly examines an aggregation method due to Gerardi which was used by EUROSTAT in its international compaison exercises (EUROSTAT (1977)). The Gerardi method is based on a simple geometric mean of the national prices expressed in different currency units. This is justified by the claim that the final comparisons are not affected by whether the national prices are converted or not converted before averaging. In this paper, we establish algebraically that such a claim is not valid as it involves the cancellation of zero coefficients in the numerator and denominator of a certain fraction.