Оценка влияния экономических показателей на паритет покупательной способности в странах ОЭСР / Assessment of the impact of economic indicators on purchasing power parity in OECD countries
Аннотация
Purchasing power parity (PPP) is a measurement of the price of specific goods in different countries and is used to compare the absolute purchasing power of the countries' currencies. PPP is effectively the ratio of the price of a basket of goods at one location divided by the price of the basket of goods at a different location. It is an international multilateral price index calculated by the world bank using international comparison data. In the international comparison project, the World Bank has organized various countries and regions to collect thousands of specifications of the price and more than a hundred kinds of GDP expenditure basic classification data according to a unified investigation scheme, standard and time. As with other price indices, the purchasing power parity rate is considered to be the national average price, or as an explanation for the cost of living.
Aim of the study is to estimate the effect of macroeconomic factors such as GDP per capita growth, exchange rate, FDI inflows/outflows, Net trade condition index, the final consumption expenditure growth rate, inflation, taxes on goods and services, education, CO2 emission and unemployment that can be affected and adjusted by the country on purchasing power parity in OECD countries.
The novelty of this study is determined by the research gap. Despite the fact that in recent times, there has been an explosion of empirical research on the validity of PPP in the real world, only a few of them examined the factors that affect PPP. Factors affecting PPP are not always obvious and there is no single answer in the literature about what influences and what does not. This indicator is used in macroeconomic planning, so it is important to understand what can affect it, and how states, in turn, can influence these indicators.
Object of the study is purchasing power parity.
Subject of the study is economies of OECD countries. I am convinced that in the era of globalization and various world crises, countries should unite and look for solutions to economic, political, social and environmental problems. This is the reason why I decided to conduct a study specifically for The Organization for Economic Cooperation and Development (OECD) countries, whose 38 members are typically democratic countries that support free-market economies and sustainable development. This international organization works to build better policies for better lives. Its goal is to shape policies that foster prosperity, equality, opportunity and well-being for all.
This paper examines impact of macroeconomic factors on purchasing power parity using data for 38 OECD countries during the period from 2012 to 2021. The data is collected from Worlbank and OECD database.
This study applies such methods as statistical analysis to examine SDGs in OECD countries and econometric techniques - panel approach (Fixed effects and Random effect model) to assess the impact of macroeconomic factors on PPP in OECD countries.
Exploring factors driving force for the purchasing power parity exchange rate fluctuations is the purpose of this paper, and therefore the dependent variable is purchasing power parity. I reference to Hua Niu, Xiaoyuan Chu, Yanxin Ma, Gelb A., Diofasi A research and decide to choose following variables: exchange rate, economic growth rate, FDI inflows/outflows, net trade condition index, the final consumption expenditure growth rate, inflation, taxes on goods and services, education, Co2 emission and unemployment.
Initially, in accordance with the literature, first specification of the model included exchange rate, economic growth rate, FDI inflows/outflows, net trade condition index, the final consumption expenditure growth rate, inflation, taxes on goods and services, education, Co2 emission and unemployment. However, due to the characteristics of the sample, exchange rate, trade in goods and services, taxes on goods and services and FDI outflows were excluded. Economic growth, FDI inflows and consumption expenditures did not have a significant effect in our model, despite the theory considers them significant.
The results show that Co2 emission, inflation, education and unemployment have the impact on purchasing power parity in OECD countries in the period from 2012 to 2021.
Co2 emission decreases purchasing power parity, so governments should take some steps to improve. The relationship between CO2 emissions and PPP can be described as follows: if CO2 increases, emissions increase, pollution increases and the country becomes less attractive for foreign direct investment. A reduction in foreign direct investment, in turn, will not create jobs, leading to stagnation or rising unemployment. Unemployment, in turn, will reduce the final consumption expenditures, which will lead to a slowdown in economic growth. The decline in economic growth will lead to a decrease in purchasing power parity. For instance, to shift to alternative technologies that either don’t need gasoline (like bicycles and electric cars), invest heavily in public transportation in the form of electric buses, high speed trains and subways, and electric ferries then the environmental impact of the transportation sector could be significantly minimized. Companies can also use renewable energy sources to power factories and ship the products that they create in fuel-saving cargo ships. Government can also take action to increase the oxygen in the air. Special programs such as planting trees, bamboo, and other plants can be implemented on jobs, universities, schools or for volunteers.
It draws our attention to the fact, that inflation increases PPP in our model. The theory holds that inflation will reduce the real purchasing power of a nation's currency, but, as we can see, in OECD countries during the period from 2012 to 2021 the situation is opposite. I think that this may be due to the nature of the sample. Despite the results, I think that the state should take measures to curb inflation.
Education has the positive impact on PPP. The state should increase interest in education so that people want to learn. For example, government can introduce more interactive content into curricula, digitalize the education system and guarantee jobs after graduation.
From our model we can see, that unemployment decreases the purchasing power parity. In my opinion, government should take actions of this problem from both sides – businesses and people. Government can implement subsidies for businesses that take on the long-term unemployed – for example or set a lower taxes on businesses that
employ more workers might be effective, for example cuts in employer national
insurance contributions for young, low-paid workers. Encourage entrepreneurship and innovation as a way of creating new products and market demand which will generate new employment opportunities. It is also important to improve skills / human capital to make people more flexible in the workplace and provide stronger incentives to look for and accept work. In this case, I think, that it would be appropriate to start from the middle classes at school to introduce special programs of interest related to various professions and provide an opportunity to take internships during the program.
Aim of the study is to estimate the effect of macroeconomic factors such as GDP per capita growth, exchange rate, FDI inflows/outflows, Net trade condition index, the final consumption expenditure growth rate, inflation, taxes on goods and services, education, CO2 emission and unemployment that can be affected and adjusted by the country on purchasing power parity in OECD countries.
The novelty of this study is determined by the research gap. Despite the fact that in recent times, there has been an explosion of empirical research on the validity of PPP in the real world, only a few of them examined the factors that affect PPP. Factors affecting PPP are not always obvious and there is no single answer in the literature about what influences and what does not. This indicator is used in macroeconomic planning, so it is important to understand what can affect it, and how states, in turn, can influence these indicators.
Object of the study is purchasing power parity.
Subject of the study is economies of OECD countries. I am convinced that in the era of globalization and various world crises, countries should unite and look for solutions to economic, political, social and environmental problems. This is the reason why I decided to conduct a study specifically for The Organization for Economic Cooperation and Development (OECD) countries, whose 38 members are typically democratic countries that support free-market economies and sustainable development. This international organization works to build better policies for better lives. Its goal is to shape policies that foster prosperity, equality, opportunity and well-being for all.
This paper examines impact of macroeconomic factors on purchasing power parity using data for 38 OECD countries during the period from 2012 to 2021. The data is collected from Worlbank and OECD database.
This study applies such methods as statistical analysis to examine SDGs in OECD countries and econometric techniques - panel approach (Fixed effects and Random effect model) to assess the impact of macroeconomic factors on PPP in OECD countries.
Exploring factors driving force for the purchasing power parity exchange rate fluctuations is the purpose of this paper, and therefore the dependent variable is purchasing power parity. I reference to Hua Niu, Xiaoyuan Chu, Yanxin Ma, Gelb A., Diofasi A research and decide to choose following variables: exchange rate, economic growth rate, FDI inflows/outflows, net trade condition index, the final consumption expenditure growth rate, inflation, taxes on goods and services, education, Co2 emission and unemployment.
Initially, in accordance with the literature, first specification of the model included exchange rate, economic growth rate, FDI inflows/outflows, net trade condition index, the final consumption expenditure growth rate, inflation, taxes on goods and services, education, Co2 emission and unemployment. However, due to the characteristics of the sample, exchange rate, trade in goods and services, taxes on goods and services and FDI outflows were excluded. Economic growth, FDI inflows and consumption expenditures did not have a significant effect in our model, despite the theory considers them significant.
The results show that Co2 emission, inflation, education and unemployment have the impact on purchasing power parity in OECD countries in the period from 2012 to 2021.
Co2 emission decreases purchasing power parity, so governments should take some steps to improve. The relationship between CO2 emissions and PPP can be described as follows: if CO2 increases, emissions increase, pollution increases and the country becomes less attractive for foreign direct investment. A reduction in foreign direct investment, in turn, will not create jobs, leading to stagnation or rising unemployment. Unemployment, in turn, will reduce the final consumption expenditures, which will lead to a slowdown in economic growth. The decline in economic growth will lead to a decrease in purchasing power parity. For instance, to shift to alternative technologies that either don’t need gasoline (like bicycles and electric cars), invest heavily in public transportation in the form of electric buses, high speed trains and subways, and electric ferries then the environmental impact of the transportation sector could be significantly minimized. Companies can also use renewable energy sources to power factories and ship the products that they create in fuel-saving cargo ships. Government can also take action to increase the oxygen in the air. Special programs such as planting trees, bamboo, and other plants can be implemented on jobs, universities, schools or for volunteers.
It draws our attention to the fact, that inflation increases PPP in our model. The theory holds that inflation will reduce the real purchasing power of a nation's currency, but, as we can see, in OECD countries during the period from 2012 to 2021 the situation is opposite. I think that this may be due to the nature of the sample. Despite the results, I think that the state should take measures to curb inflation.
Education has the positive impact on PPP. The state should increase interest in education so that people want to learn. For example, government can introduce more interactive content into curricula, digitalize the education system and guarantee jobs after graduation.
From our model we can see, that unemployment decreases the purchasing power parity. In my opinion, government should take actions of this problem from both sides – businesses and people. Government can implement subsidies for businesses that take on the long-term unemployed – for example or set a lower taxes on businesses that
employ more workers might be effective, for example cuts in employer national
insurance contributions for young, low-paid workers. Encourage entrepreneurship and innovation as a way of creating new products and market demand which will generate new employment opportunities. It is also important to improve skills / human capital to make people more flexible in the workplace and provide stronger incentives to look for and accept work. In this case, I think, that it would be appropriate to start from the middle classes at school to introduce special programs of interest related to various professions and provide an opportunity to take internships during the program.