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Relative GDP shares are frequently used as weights in aggregations. In order to ensure that these weights reflect countries’ shares in real output, GDP data in national currencies should be converted into a common numeraire currency at purchasing power parity (PPP) rates. A review of the empirical evidence on the relationship between exchange rates and prices suggests that market (or official) exchange rates are generally poor proxies for PPP rates. The paper examines the PPP-based GDP data generated by the International Comparison Program and compares aggregations with PPP- and exchange rate-based GDP weights.

Foreign Exchange --- Money and Monetary Policy --- Public Finance --- Index Numbers and Aggregation --- leading indicators --- Price Level --- Inflation --- Deflation --- National Government Expenditures and Related Policies: Infrastructures --- Other Public Investment and Capital Stock --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Currency --- Foreign exchange --- Public finance & taxation --- Monetary economics --- Public investment and public-private partnerships (PPP) --- Purchasing power parity --- Exchange rates --- Market exchange rates --- Currencies --- Expenditure --- Money --- Public-private sector cooperation --- United States --- Leading indicators