Conversion factors : a discussion of alternate rates and corresponding weights
The significant operational implications underlying the Bank's estimates of per capita GNP, represent important considerations in systematizing the use of official rates in determining the exchange rate to be used in the Atlas methodology. This paper discusses issues and procedures to develop a time series of alternative conversion factors with corresponding weights for use in converting and presenting macro-level country statistics in a common unit of account, e.g. the U.S. dollar. The focus of the paper is on conversion factors that are representative of transaction or"effective"conversion factors. It also emphasizes the implications for Bank estimates of per capita, the kinds of evidence relevant in assessing the underlying conversion factors, and identifies countries where review of the official exchange rate merits serious consideration. The paper reviews the main concerns about the adequacy of the official exchange rate as a conversion factor.
Purchasing Power Parity and Black-Market Exchange Rates
This paper develops a theory of black-market exchange rate determination as a function of the market-clearing rate, the official rate and changes in official reserve levels. The model is tested for three countries over the period 1952–1971 by using purchasing-power-parity calculations as approximations of the equilibrium rate. The results indicate that relative rates of inflation are the dominant forces influencing equilibrium exchange rates.
Purchasing-Power Parity Theory and Economic Reform in Yugoslavia
This study tests the applicability of purchasing-power parity theory to movements in the exchange rates between the Yugoslav dinar and two West European currencies during the 1950s and 1960s. The purpose is to determine whether these exchange rates were administered without regard to underlying economic conditions, as is commonly thought, or whether they actually reflected changes in economic fundamentals within the selected countries. Although an absence of accessible, appropriate data precludes an examination of currency exchange rates and purchasing powers within Eastern Bloc countries, one of these Socialist countries, Yugoslavia, has been introducing market-oriented reforms more rapidly than other countries in Eastern Europe and has produced a set of economic statistics more readily comparable with those of Western countries. These developments provide an opportunity to examine the exchange rates between this one East European currency and Western currencies. 1 Accordingly, this study examines the exchange rates between the currency of Yugoslavia and those of her major Western trading partners, Italy and West Germany. The framework for analysis is the purchasing-power parity theory, which holds that the equilibrium exchange rate between two currencies is determined primarily by their relative purchasing powers.2 The theory became widely known following World War I, when it was formulated and expounded by Gustav Cassel. Cassel originally contended that