Abstract

The chain methods are a kind of PPP aggregation methods that have been developed in the field of international price and volume comparison in recent years. In order to deepen the research and understanding of the chain methods, this paper focuses on the link mechanism of the chain methods and several basic theoretical issues that affect the development and application of the chain methods, proposes a chain method that satisfies additivity (the AMD method), and reviews the advantages and disadvantages of all the chain methods and the GK method that was once popular in the global International Comparison Program. It is found that the connotation of characteristicity should be analyzed according to the index type, and there is an inherent consistency between improving characteristicity and reducing measurement errors of PPP aggregation methods, while the development of the chain methods imply the purpose of improving characteristicity; In order to identify the link path between countries, the measurement perspective of the economic distance between countries can be clarified by combining characteristicity- building a binary similarity index that includes price structure and quantity structure; Compared with the single dimension similarity index, the AMD method based on the binary similarity index constructed in this paper has a better representation of the international average price to the price structure of each economy; the AMD method has better measurement advantages in application-it is not only the only PPP aggregation method with many excellent properties such as transitivity, base country invariance, additivity, characteristicity and factor reverse test, but also has less measurement error, not easily affected by whether large economies participate in comparison, and the international average price implied in the AMD method is more representative of the price structure of all economies. This study provides new theoretical and empirical knowledge for the development and application of the chain methods, and the improved method makes up for the shortcomings of the existing chain methods that cannot be used for economic structure analysis.