Research Agenda for the 2011 ICP Round – Priority List

1. Research Agenda for the 2011 ICP Round – Priority List Prepared by the Chair of the Interim Technical Advisory Group (ITAG) for Discussion at the Interim Executive Board Meeting on October 24, 2008

2. Background to Report • Consultations with ITAG began in July • Response enthusiastic but no convergence on 3 interdependent ring related concepts: • Core and overlap items • Representativity • National average prices • Drafts and redrafts produced the distributed report and its conclusions

3. Interdependent Issues • Core and Overlap Items a seemingly straight-forward idea: • Eurostat in 2005 organized meetings into Northern, Central and Southern Groups of their 31 Countries with Finland, Austria and Portugal as the group leaders • Begin with a non-compulsory list of items • Groups respond with items they find representative whether or not on list • Items Overlapping at least 2 of the country groups become the final items compared across groups • Can the model be applied globally?

4. Some Questions on the Core-Overlap Approach-Representativity • Representativity - an EU-OECD operational concept that did not export well in 2005 and was not used • Can countries within Regions, whether in subgroups or not, agree on enough representative overlapping items to link countries? • What is the sequence? • Starter lists for the world and for each region? • Revised core list…All representative? • How many countries/sub-regions/regions need price an item (what is the necessary overlap) to designate at item as core?

5. National Prices and Urban Pricing and Use of CPI Outlets • Because expenditures embody national average prices, conceptually the ICP has sought to collect national average prices • In practice, countries mostly collect prices from CPI Outlets that are mainly urban, which raises questions • What if the urban outlets do not represent the spatial distribution of prices in a country? • If new outlets are introduced will they be representative? Of non-CPI-sampled areas? Of qualities of goods that are representative? • Should we record other price-determining characteristics of an item along with its price?

6. Organization Issues and the Core Item Proposal • In order for Eurostat to implement the linking across its groups countries must supply their prices to Eurostat • Should other Regions move to sub-regional comparisons, the Coordinating Office would need country prices • Likewise for the Global Office to carry out linking across the regions they must have item prices from a ‘suitable’ number of countries, where ‘suitable’ has to be defined. For this to happen there must be agreement from the start of ICP 2011 by a sufficient number of countries from each region. • Is a fall-back position necessary? What would it be?

7. Achieving Common Methodology for Construction and Non-priced Services • Construction: • The BOCC approach to construction imposed an additional burden on the Ring countries of the OECD because they use the Bills of Quantities approach • The OECD may slightly modify the BofQ in 2011 but there will remain some important differences to be resolved • Education: • The non-comparability in treatment of education and government consumption expenditures between the regions in 2005 needs to be addressed • The OECD will adopt a different treatment of education for 2011 based on students. Is this approach feasible for the ICP in other regions?

8. Expenditures and Market and Imputed Rental Services • Expenditure Reviews • Possible changes in number of Basic Headings • Review of 2005 results to flag BHs that display unlikely patterns across counties, like housing • Rental Services • Large differences in expenditure shares need regional discussion • Problems that non-comparable expenditure estimates raise for estimating of real quantities • Further the market rent, quantity and synthetic approaches to PPP estimates need to be improved and made consistent with expenditures

9. Some Less Immediate Priorities • Provision of error estimates for aggregate estimates • Issues in linking within regions and between regions of different sizes • Aggregation issues including treatment of exports and imports

10. Poverty PPPs and the ICP • Analysis of the 2005 benchmark PPPs in terms of estimating PPPPs is ongoing • Important finding is that there are large differences between HH surveys and the national accounts expenditures of the ICP • Needs of the poverty program primarily requires parallel planning

11. Wrap Up • The ITAG sees the Core Item-Representativity-National Average Price Nexus as 1st priority • Comparable Regional Methods for non-priced services and construction is a close second • The ITAG strongly recommends that a technical group be convened asap to provide an initial framework for 2011 • We now seek the views of the Executive Board on these priorities and the recommendation to convene a meeting