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EKS METHOD

Statistics Directorate    
Definition:
A multilateral method developed by O. Elteto, P. Koves and B. Szulc [Schultz] that computes the nth root of the product of all possible Fisher indexes between n countries. It has been used at the detailed heading level to obtain heading parities, and also at the GDP level. EKS has the properties of base-country invariance and transitivity.

Context:
It is the method used by Eurostat and the OECD to calculate PPPs for basic headings and to aggregate basic heading PPPs to obtain PPPs for each level of aggregation up to and including GDP.

Strictly speaking, the EKS is a procedure whereby any set of intransitive binary index numbers are made transitive while respecting characteristicity.

The procedure is independent of the method used to calculate the intransitive binary indices.

Basically, the method used to obtain the intransitive binary PPPs for a basic heading or aggregate involves calculating first a matrix of Laspeyres type PPPs, then a matrix of Paasche type PPP and finally, by taking the geometric mean of the two, a matrix of Fisher type PPPs. The Fisher type PPPs are made transitive and multilateral by applying the EKS procedure which involves replacing the Fisher type PPP between each pair of countries by the geometric mean of itself squared and all the corresponding indirect Fisher type PPPs between the pair obtained using the other countries as bridges. The resulting EKS PPPs provide real final expenditures that are not additive, nor subject to the Gerschenkron effect.

Within the context of Eurostat-OECD comparisons, EKS results are considered to be better suited to comparisons across countries of the price and volume levels of individual aggregates. EKS results are the official results of Eurostat-OECD comparisons.

See also “Laspeyres type PPP” and “Paasche type PPP” because their formulation depends on whether they are being used to calculate basic heading PPPs or to aggregate basic heading PPPs.

Eurostat, OECD, 2007, Eurostat-OECD Methodological Manual on Purchasing Power Parities, OECD, Paris – Annex VII, Glossary of terms and abbreviations.

Source Publication:
Handbook of the International Comparison Programme, Studies in Methods, Series F, No. 62, United Nations Department of Economic and Social Development, Statistical Division, New York, 1992, Glossary.

Cross References:
EKS-S method
Laspeyres type PPP
Paasche type PPP

Hyperlink:
http://unstats.un.org/unsd/methods/icp/ipco_htm.htm

Statistical Theme: Prices and purchasing power partities

Created on Thursday, February 06, 2003

Last updated on Thursday, July 26, 2007