Updating 2005 Purchasing Power Parities to 2009 in the Asia and Pacific Region: Methodology and Empirical Results

Purchasing power parities (PPPs) estimated on an annual basis are used in many analyses and are highly demanded by researchers in various fields, ranging from poverty and comparative living standards, to competitiveness and military expenditures. However, the regular PPP exercises are conducted every 5–6 years, or even less frequently (12 years passed between the 1993 and 2005 exercises). The financial and human resources that go into a benchmark PPPs exercise are very significant. Hence, PPPs for nonbenchmark years are usually extrapolated using national accounts' deflators. This simplistic updating, however, results in outcomes that are not consistent with benchmark estimates, with the inconsistencies increasing as the year of extrapolation moves further away from the benchmark. This paper discusses alternative methods and approaches for estimating PPPs for nonbenchmark years in the Asia and Pacific region. Collectively called 2009 PPP Update, the methods and approaches constitute an extension of the 2005 PPP benchmark for the Asia and Pacific region, with additional data collected in 2009 and some interproduct and intracountry price correlations made against the 2005 exercise. The 2009 PPP Update concentrates on a core list of items for household consumption, and investment on machinery and equipment. The methodology to create a statistically efficient and reduced product list for the 2009 PPP Update is discussed. In most economies, prices are being collected in capital cities only and adjusted to the national levels using price data from consumer price indices (CPI) or other information. For gross fixed capital formation in construction, the paper suggests a simplified regression method. For government consumption, the same methodology as in the 2005 ICP was adopted

Poverty in Asia and the Pacific: An Update

Poverty reduction in the Asia and the Pacific region in 2005–2008 had been quite significant. Despite the global crisis, an estimated 150 million people exited extreme poverty by 2008 - from 903.4 million in 2005 to 753.5 million, bringing the percentage of people living under the $1.25 per day poverty line to 21.9$1.25 and $2 per day poverty lines. This can be attributed to faster population growth than poverty reduction. The ranking of the large poor countries remained the same. In 2008, India continued as home to the largest number of the region's poor, followed by the PRC, Bangladesh, Indonesia, and Pakistan. While a significant number moved out of extreme poverty, the number of moderately poor - those living between$1.25 and $2 per day - dropped only marginally, by around 18.4 million. Using the$2 per day poverty line, 47.4% of the region's total population or 1.63 billion can be classified as poor in 2008. Fourteen of the 25 Asian Development Bank (ADB) developing member countries (DMCs) had headcount ratios above 40%. In particular, poverty reduction was slower in low-income DMCs than the others under both the $1.25 and$2 per day poverty lines, implying the need for continued financial support for poverty reduction. Due to the global crisis, poverty reduction became slower. Between 2008 and 2009, based on projections, the number of the poor is estimated to have increased in 9 and 10 of the 25 DMCs, under the $1.25 per day and$2 poverty lines, respectively. Asia and the Pacific region remains home to the largest number of the world's poor. In 2008, around 63% of the poor worldwide lived in the region

$1.90 Per Day: What Does it Say?

The World Bank's global poverty estimates suffer from deep-seated problems arising from a single source, the lack of a standard for identifying who is poor and who is not that is consistent and meaningful. The new choice of an international poverty line of $1.90 (2011 PPP) does not in any way resolve these problems. We present alternate estimates of global, regional and national poverty based on reasoning as to what the Bank's own method, consistently applied, would entail. These show an increase in the absolute number of poor since 1980 or 1990 for certain choices of poverty line. However, we recommend an approach to income poverty assessment that is altogether different, focusing directly on identifying the real requirements of human beings to attain incomedependent human capabilities