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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (466)	1/5/1998 1:29:00 PM
From: HB	Read Replies (1) \| Respond to of 9980

Nice link, thanks. Note that the figures are for GNP, not GDP (difference is explained at the bottom of the chart.) Also, the picture looks rather different if you look at the GDP adjusted for purchasing power parity (PPP), also given in the chartts in your link. (I don't know exactly how the PPP works, but presumbly the extremely high cost of living in Japan (at world exchange rates, which you'll have noticed if you've talked to anyone who's been to Japan... although that would seem to be changing..) is reflected in the much lower (~$23K) PPP adjusted figure for Japan, though these figures are also GDP rather than GNP... PPP adjusted figures adjust for the fact that exchange rates are affected primarily by relative prices of traded goods in different countries, whereas the prices of nontraded goods are also important if one is interested in how "well off" different countries are. Howard

To: RealMuLan who wrote (466)	1/5/1998 1:47:00 PM
From: Geoff Nunn	Read Replies (1) \| Respond to of 9980

Yiwu, the GDP data I used were derived using the "purchasing power parity" method whereas your data weren't -- that's the difference. When you convert any country's ave. GDP figure into another currency, say dollars, you can either use exchange rates or you can use ppp. estimates. The simplest way is to use exchange rates -- as your figures do, but unfortunately this method can lead to nonsensical results. Take S. Korea, for example. Let's assume the ave GDP is 12mil won. When the exchange rate is 1000= $1, then ave GDP is $12,000. Now, suppose the won loses one half its value (as it almost did in 1997!) then the exchange rate is 2000=$1. This means that Korean GDP falls to $6000 -- one half the previous GDP This of course is nonsense. Korea's actual GDP didn't change, only the exchange rate changed. The fundamental problem is that an exchange rate is frequently a misleading indication of the relative purchasing power of the currencies. For this reason economists developed an alternative estimate of purchasing power, which is ppp. This method estimates the relative purchasing power of the currencies by comparing prices (usually of internationally traded goods) in each country. While this approach has shortcomings of its own, it is far superior to the alternative. If you want to see ppp derived estimates of GDP, you should go back to the link you suggested for me! The figures are there, in the column just to the left of the one you used. The table gave you an opportunity to go wrong, and you took it. <G> Geoff