International Comparison Program (ICP)

Definition

The term International Comparison Program refers to a statistical study that provides price and volume measures of gross domestic product among countries. The International Comparison Program (ICP) collects and compares price data and purchasing power of the economies across the globe.

Explanation

A price index is a benchmark measure that allows analysts to understand how the price of goods and / or services varies over time or between geographies. Broad based indices allow economists to understand how well an economy is performing and the impact of prices on the cost of living. The International Comparison Program, or ICP, is an initiative led by the World Bank with the objective of allowing for comparisons of gross domestic product among countries.

The ICP was established in 1968 with funding from the University of Pennsylvania, the World Bank, and the Ford Foundation. Since its inception, participation in GDP comparisons has grown from approximately 10 to 200 countries. Comparisons are made using a standard definition of gross domestic product (GDP).

Purchasing Power Parities (PPPs) measure the total goods and services that a single unit of currency can purchase in another country. For example, the PPP between China and the United States would measure the number of yuan required to purchase a basket of goods or services in the United States compared to the number of US dollars required to purchase the same goods and services from China. In doing so, the PPP information converts the cost of the goods and services into a common currency; thereby eliminating price level differences between the United States and China.

As is the case with other price level data, various government agencies, businesses, and academia can use the PPPs to shape monetary and fiscal policies of their countries. The data can also be used to understand relative competitiveness of a country, shape trade policies, and understand the cost to invest in another country.

Related Terms

producer price indexprice indeximport and export price indexGDP deflatoremployment cost index, consumer price index