Editing Purchasing power parity (section)

=====Extrapolating PPP rates=====

Since global PPP estimates—such as those provided by the ICP—are not calculated annually, but for a single year, PPP exchange rates for years other than the benchmark year need to be extrapolated.<ref>{{cite journal |url=http://www.oecd.org/std/prices-ppp/2078177.pdf |title=Purchasing power parities – measurement and uses |author1=Paul Schreyer |author2=Francette Koechlin |date=March 2002 |number=3 |journal=Statistics Brief |publisher=OECD}}</ref> One way of doing this is by using the country's [[GDP deflator]]. To calculate a country's PPP exchange rate in Geary–Khamis dollars for a particular year, the calculation proceeds in the following manner:<ref>{{cite web|url=http://siteresources.worldbank.org/ICPINT/Resources/270056-1255977254560/6483625-1291755426408/18_ICPBook_Extrapolating_FINAL.pdf|title=Chapter 18: Extrapolating PPPs and Comparing ICP Benchmark Results|publisher=[[World Bank]]|work=[[International Comparison Program]]|author=Paul McCarthy|page=29}}</ref>

:<math>\textrm{PPPrate}_{X,i}=\frac{\textrm{PPPrate}_{X,b}\cdot \frac{\textrm{GDPdef}_{X,i}}{\textrm{GDPdef}_{X,b}}}{\textrm{PPPrate}_{U,b}\cdot \frac{\textrm{GDPdef}_{U,i}}{\textrm{GDPdef}_{U,b}}}</math>

Where PPPrate<sub>X,i</sub> is the PPP exchange rate of country X for year i, PPPrate<sub>X,b</sub> is the PPP exchange rate of country X for the benchmark year, PPPrate<sub>U,b</sub> is the PPP exchange rate of the [[United States]] (US) for the benchmark year (equal to 1), GDPdef<sub>X,i</sub> is the GDP deflator of country X for year i, GDPdef<sub>X,b</sub> is the GDP deflator of country X for the benchmark year, GDPdef<sub>U,i</sub> is the GDP deflator of the US for year i, and GDPdef<sub>U,b</sub> is the GDP deflator of the US for the benchmark year.