Subnational PPP toward Integration of ICP and CPI: The Case of the Philippines Yuri Dikhanov 3 rd Regional Coordinating Agencies meeting October 28-30, 2015 Washington, DC losure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Outline of Presentation Rationale for Subnational PPP Objectives ICP and CPI: The Link Analysis of Price Levels Across Regions in the Philippines: The PPP Approach Data Requirements Estimation Methodology Major Results Issues and Limitations
Rationale for Subnational PPP Key element for achieving sustainability of the ICP and its gradual integration in the regular price collection particularly the CPI : Advocate construction and use of PPP at national level sub national poverty levels sub-national price levels Use CPI information for sub-national PPP compilation 3
Rationale for Subnational PPP Main Advantage No additional data collection Otherwise, another set of comparable set of data maybe collected to reflect target population (e.g. spending of the poor, etc. ) 4
ICP and CPI: The Link Spatial (ICP) comparability across space Temporal (CPI)comparability across time The Link Apply ICP concepts to CPI Information Calculate subnational PPPs Directly compare regions and states within country across time
Analysis of Price Levels Across Regions in the Philippines: The PPP Approach Objective Explore the possibility of comparing regional price levels for the 17 major regions in the Philippines by applying the PPP concepts s Study how the derived subnational PPPs can be used to adjust the collected price levels for the 2009 PPP Updates to reflect national average price levels
Analysis of Price Levels Across Regions in the Philippines: The PPP Approach Data Requirements Expenditure Weights from Household Expenditure Survey (which is the same as the ones used for calculating CPI at the aggregated level) Average Prices for each variety by Region/Province from CPI price collection
Analysis of Price Levels Across Regions in the Philippines: The PPP Approach Specific Data requirements Established Coding System (Country or International) Prices for exactly the same products Geographic Coverage: Depends on Study (could be provincial, regional, city, etc.) Expenditure weights based on target aggregation level and should coincide with target groupings or geographic coverage 8
Estimation Methodology Step 1 Consolidate price and expenditure data by region/province Step 2 Construct/Build-up Database Step 3 Determine total number of varieties by specified item codes Step 4 Identify variety overlaps and select varieties that are priced by at least two regions/provinces Step 5 Data editing and validation Intra-region/province Inter-region/province Step 6 PPP Calculation By 2-Digit Code By Higher Level Aggregates (Major Groups)
Estimation Methodology Main Aggregates Food, Beverages and Tobacco Clothing and Footwear (CFW) Housing And Repairs (HH) Fuel, Light and Water (FLW) Services (Srvs) Miscellaneous (Misc)
Estimation Methodology Aggregation Methods: CPD 2-digit level Aggregate level Weighted geometric mean total Philippines
Estimation Methodology Lower Level (2-Digit Codes) Aggregates Cereal And Cereal Preparation Dairy Products Eggs Fish Fruits And Vegetables Meat Miscellaneous Foods Beverages Tobacco
Estimation Methodology Lower Level (2-Digit Codes) Aggregates(cont d) Footwear Ready-Made Apparel Except Footwear Custom Clothes (Accesories And Services) Minor Repairs Rentals Fuel Light Water
Estimation Methodology Lower Level (2-Digit Codes) Aggregates(cont d) Educational Services Medical Services Personal Services Recreational Services Transportation And Communication Other Services Household Furnishing And Equipment Household Operations Personal Care And Effects Other Miscellaneous Goods
Major Results Estimated Quarterly Price Indexes versus Official Consumer Price Index, 2005 2010
Major Results Personal Consumption Expenditure Quarterly Regional Price Index, 2005 2010
Major Results Food, Beverages, and Tobacco Quarterly Regional Price Index, 2005-2010
Major Results Nonfood Items Quarterly Regional Price Index, 2005-2010
Major Results Clothing and Footwear Quarterly Regional Price Index, 2005-2010
Major Results Housing and Repairs Quarterly Regional Price Index, 2005-2010
Major Results Fuel, Light and Water Quarterly Regional Price Index, 2005-2010
Major Results Services Quarterly Regional Price Index, 2005-2010
Major Results Miscellaneous Items Quarterly Regional Price Index, 2005-2010
Issues and Limitations Elementary aggregation is conducted at the 2- digit level. Incorporating weights for 2006 and 2009 in the calculation, and estimating the weights for remaining years through interpolation, are intended. More work is needed in order to explain the factors of differences between the ADB calculation and official CPI. Regional price movements are highly correlated, however, substitution effects is yet to be studied.