Transcript Editing and Validation Prices and PPPs* ICP-Western Asia Regional Meeting Beirut, Lebanon May 26, 2005 Yonas Biru [email protected] *Presentation adopted from Chapter 7 of the ICP Handbook.

Editing and Validation
Prices and PPPs*
ICP-Western Asia Regional Meeting
Beirut, Lebanon
May 26, 2005
Yonas Biru
[email protected]
*Presentation adopted from Chapter 7 of the ICP Handbook
Editing & Validation
The primary objective is to eliminate or reduce the incidence
of non-sampling errors & to correct them when detected
The ICP uses a hierarchy of checking and validation
procedures
First, outliers of individual prices are identified and screened
at item level within a country
Second, outliers of average prices can be identified and
screened for different products within the same basic heading
within the same country
Third, outliers of average prices are identified and screened
for the same products in different countries.
Tool Pack For Data Validation
The Tool Pack Supports both intra-country (Tables 1 and 2)
and inter-country data editing and validation (Quaranta
Tables)
Intra-country Validation Process (National Coordinators)
PCM: Screening of individual price observations
PAM: Screening of average prices both at product and at the
BH level
Inter-country Validation Process (Regional Coordinators)
PAM: Screening of average prices for the same products in
different countries are checked against each other
Prevention is Better than Correction
The amount of data editing and validation work at the
regional level depends on the quality of the data collected
Good survey frame and survey management practices are
critical to minimize non-sampling errors
Well defined product specifications accompanied with
product images and clear instruction and questionnaires
help minimize product related errors
Data collectors and data entry clerks should be well trained
and regularly supervised
Closely monitored and supervised field work helps
eliminate or reduce errors
Validation Is An Iterative Process
National Coordinators (NC) send edited price data to the
Regional Coordinator (RC)
RC computes Basic Heading PPPs, examines Quaranta Tables
(QT) & sends feedback to NCs for correction or validation
NCs recheck data, correct errors or validate the first
submission or withdraw the data in question.
RC computes Basic Heading-PPPs using revised data
RC may get back to NCs for further checking & validation
RC generates Basic heading PPPs using fully edited prices
Editing is completed when NCs endorse their data as final
Acceptance of the price data implies endorsement of BH-PPP
results
Time Is Of The Essence
Running the full sequence of editing and validation for a given
quarter can take as long as five to six months
The process must be carefully planned and tightly scheduled
NCs need to realize that a delay on their end will drag the
regional program
RCs need to provide feedback to NCs without delay
RC, however, cannot start the process before data from at
least 50% of the countries are submitted
Timely validation of data is crucial to put in place the
necessary corrective measures for the subsequent quarter
County Level Editing & Validation
Editing should start immediately after data collection and
should be undertaken on a regular basis
The objective Is to identify extreme observations or outliers
(Outlier are observations diverge so much from the average)
The policy is not to reject outliers outright but to investigate
further if they are indeed outliers
It is recommended that a separate editing and validation
process should be carried out in each region within a country
Country level editing are then carried out under the general
guidance and supervision of the national coordinator
Steps should be taken to avoid errors detected in the early
rounds of price collection from being repeated in later
rounds
After the preliminary editing at the country level the data is
transferred to regional coordinator for further checking
Table 1 and 2 of the Tool Pack
Data editing is carried out using standard format and tables
Table 1 provides Average Prices, Max and Min prices as well as
Standard Deviation and Var. Co.
If the Var. Co. for a given product is > 30% we go to the
corresponding Table 2 for further investigation
Table 2 provides individual price observations, ratio to average
price, Min and Max prices, as well as Min Max ratio and “tvalue”
‘t-values’ measure divergence between an individual price and
the average price divided by the standard deviation
At 95% degree of confidence the ‘t-ratio’ falls between 2 & -2
Ratio between individual price and average price should fall
between 1.25 and .75
1
2
3
4
After Country Level Editing Data Is Transferred To RC
Regional Editing & Validation
The primary objective is to eliminate or reduce the incidence
of non-sampling errors by comparing prices across countries
Editing is done in cooperation with National Coordinators
Types of potential error sources
Price Error – Wrong price is recorded for the right product,
the right UOM and/or the right outlet (this may happen
when data is collected or entered into the Tool Pack)
Product Error – Price represents the wrong specification,
including error in UOM, product specification and outlet type
(this is harder to detect at the country level)
The Quaranta Tables
QTs represent a set of diagnostic tables for a basic heading
and one for each product level details within the BH
QTs consist of data submitted by NCs and other indicators
computed by RCs
QTs are useful to screen the estimated national average
prices for possible errors by comparing the dispersion of
the average prices for the same product in different
countries
Data editing is done after national average prices have been
converted into a common unit of currency by using
Exchange Rates (XR) or PPPs.
Data Required for Quaranta Tables
Average Prices Expressed in National currencies
Exchange Rate (XR) for the survey period
Basic Heading PPPs (the BH-PPPs are unweighted PPPs
calculated by the CPRD method.)
Expenditure weights at the BH level
The number of products and the number of representative
products priced by the country under investigation
The BH weights and the number of products are useful
indicators of the importance and coverage of the BH
The BH weights and the number of products prices inform
decision making in the validation process
Other Indicators
BH-PLI: (Price Level Indexes at the BH level) This is also
known as CUP price
BH-PLI is defined as (BH-PPP) / (XR)
The BH-PLI facilitate the comparison of price levels both
across basic headings and within basic headings.
XR-PRICE: These are prices expressed in a common
currency
PPP-PRICE Are prices expressed in PPP terms
CV (Coefficient of Variation)
Coefficient Of Variations
There are 3 different CVs in the Quaranta Tables
Var. Co for the individual price variations on which each
national average price is based
The second Var. Co is the average Var. Co that measures
the relative dispersion of the PPP prices or the PPP price
ratios for the same product in different countries
The average of CVs for the individual product prices can
be used as an indicator of the overall reliability of the basic
heading parities
The third Var. Co is a country Var. Co. It measures the
dispersion in the PPP Price Ratio for the different products
in single country.
Quaranta Tables
Quaranta Tables
XR-Price: National Average Prices expressed in a common currency (D)
PPP-Price: National Average Prices expressed in PPP (D)
PLI: (PPP-Price/EX-Price) shows price relatives –
County “A” is most expensive and “E” least expensive
Items: No. of items and no. of representative items in the BH
Var. Co: Variation Coefficient
Quaranta Tables
1. PLI% for country “A” warrants a closer look, but the Var. Co seems OK
2. Var. Co for country “C” warrants a closer look, but the PLI% seems OK.
3. Both PLI% & Var. Co of Country “E” warrant closer investigation
Item Level Details
XR- Ratio: Ratio of XR-Price to GeoMean of XR-Price
PPP-Ratio: Ratio of PPP-Price to GeoMean of PPP-Price
Var. Co for country “A” shows Var. Co for individual price observations
The second type of variation (75.63) measures the relative dispersion of
the PPP prices (or PPP Price Ratios) for the same product in different
countries
Flagging and Editing Outliers
XR-PRICE and the BHPPP-PRICE are used to obtain
product price level indices (XR-PLI and BHPPP-PLI)
Product price level indices that fall outside specified ranges
are flagged. Usually 50 and 150 are used as lower and upper
bound thresholds.
In the first instance, both the indices are considered
together
What do we do if XR-PLI flags the product as an outlier,
but the BHPPP-PLI did not?
Usually the BHPPP-PLI is accepted. In the Quarants Tables
the Var. Co is computed for PPP-PLI.
Data Validation
When the BHPPP-PLI of a country is flagged, it is
necessary to look closely at the average price underlying the
index.
All prices considered suspect are sent back to countries for
verification. Usually countries either change the price or
withdraw it.
Countries check if the price is the wrong price, in which
case they will either correct it or simply withdraw it.
If the price is correct then they would confirm its validity
and send it back to the regional coordinator.
Potential Sources of Errors
The price may be correct but it may be on clearance
The quality of the product priced is of higher or lower quality
The country has priced the right product in the wrong outlet
The product specification is misrepresented
Product may be imported when the specification is for local
brand
The product is unrepresentative
As the result of this process sometimes both price and
representativeness could be changed
Countries may also supply more info about the product priced
This can result in revising the product specification