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International dollar
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The international dollar (int'l dollar or intl dollar, symbols Int'l$., Intl$., Int$), also known as Geary–Khamis dollar (symbols G-K$ or GK$), is a hypothetical unit of currency that has the same purchasing power parity that the U.S. dollar had in the United States at a given point in time.[1][2] It is mainly used in economics and financial statistics for various purposes, most notably to determine and compare the purchasing power parity and gross domestic product of various countries and markets. The year 1990 or 2000 is often used as a benchmark year for comparisons that run through time. The unit is often abbreviated, e.g. 2000 US dollars or 2000 International$ (if the benchmark year is 2000).
It is based on the twin concepts of purchasing power parities (PPP) of currencies and the international average prices of commodities. It shows how much a local currency unit is worth within the country's borders. It is used to make comparisons both between countries and over time. For example, comparing per capita gross domestic product (GDP) of various countries in international dollars, rather than based simply on exchange rates, provides a more valid measure to compare standards of living. It was proposed by Roy C. Geary in 1958 and developed by Salem Hanna Khamis between 1970 and 1982.
Figures expressed in international dollars cannot be converted to another country's currency using current market exchange rates; instead they must be converted using the country's PPP exchange rate used in the study.
Exchange rate by country
According to IMF, below is the exchange rate of International dollar to local currency of respective countries in 2018:
CountryExchange rate in 2018[3]
Afghanistan19.483
Albania42.454
Algeria31.034
Angola133.623
Antigua and Barbuda1.683
Argentina15.95
Armenia196.873
Aruba1.154
Australia1.44
Austria0.833
Azerbaijan0.445
Bahamas, The1.005
Bahrain0.191
Bangladesh31.561
Barbados1.904
Belarus0.642
Belgium0.818
Belize1.143
Benin211.003
Bhutan22.711
Bolivia3.119
Bosnia and Herzegovina0.702
Botswana4.531
Brazil2.027
Brunei Darussalam0.528
Bulgaria0.665
Burkina Faso200.504
Burundi753.844
Cabo Verde45.624
Cambodia1399.891
Cameroon225.503
Canada1.207
Central African Republic315.84
Chad201.125
Chile396.744
China, People's Republic of3.499
Colombia1314.614
Comoros207.693
Congo, Dem. Rep. of the976.995
Congo, Republic of209.142
Costa Rica393.262
Croatia6.25
Cyprus0.6
Czech Republic13.45
Côte d'Ivoire223.279
Denmark7.356
Djibouti93.361
Dominica1.888
Dominican Republic22.49
Ecuador0.541
Egypt3.425
El Salvador0.488
Equatorial Guinea255.465
Eritrea4.865
Estonia0.578
Eswatini5.168
Ethiopia10.028
Fiji1.112
Finland0.903
France0.792
Gabon247.587
Gambia, The13.22
Georgia0.964
Germany0.77
Ghana1.567
Greece0.592
Grenada1.846
Guatemala4.048
Guinea3532.387
Guinea-Bissau235.528
Guyana120.031
Haiti30.474
Honduras11.646
Hong Kong SAR5.915
Hungary134.826
Iceland144.259
India18.13
Indonesia4240.903
Iran17.750
Iraq395.634
Ireland0.833
Israel3.943
Italy0.732
Jamaica73.926
Japan98.089
Jordan0.321
Kazakhstan117.161
Kenya50.041
Kiribati1.05
Korea, Republic of847.093
Kosovo0.322
Kuwait0.14
Kyrgyz Republic22.703
Lao P.D.R.2842.329
Latvia0.51
Lebanon949.423
Lesotho5.302
Liberia0.513
Libya0.759
Lithuania0.465
Luxembourg0.919
Macao SAR5.692
Madagascar939.227
Malawi213.558
Malaysia1.427
Maldives10.265
Mali216.138
Malta0.574
Marshall Islands1.029
Mauritania10.238
Mauritius16.071
Mexico9.145
Micronesia, Fed. States of1.052
Moldova7.337
Mongolia736.791
Montenegro0.387
Morocco3.537
Mozambique22.368
Myanmar288.453
Namibia7.046
Nauru1.269
Nepal34.978
Netherlands0.798
New Zealand1.483
Nicaragua11.586
Niger216.631
Nigeria110.449
North Macedonia20.231
Norway8.919
Oman0.152
Pakistan30.278
Palau1.029
Panama0.61
Papua New Guinea2.372
Paraguay2538.502
Peru1.617
Philippines18.28
Poland1.741
Portugal0.612
Puerto Rico0.802
Qatar1.976
Romania1.829
Russian Federation24.572
Rwanda296.092
Saint Kitts and Nevis1.613
Saint Lucia2.057
Saint Vincent and the Grenadines1.659
Samoa1.883
San Marino0.687
Saudi Arabia1.584
Senegal217.987
Serbia41.223
Seychelles7.589
Sierra Leone2647.673
Singapore0.859
Slovak Republic0.472
Slovenia0.602
Solomon Islands7.804
Somalia0.391
South Africa6.172
South Sudan, Republic of33.285
Spain0.648
Sri Lanka49.561
Sudan7.67
Suriname2.863
Sweden8.807
Switzerland1.251
Syriano data
São Tomé and Príncipe12.164
Taiwan Republic of China14.212
Tajikistan2.206
Tanzania722.834
Thailand12.354
Timor-Leste0.435
Togo212.697
Tonga1.738
Trinidad and Tobago3.435
Tunisia0.731
Turkey1.619
Turkmenistan1.267
Tuvalu1.252
Uganda1085.74
Ukraine9.115
United Arab Emirates2.107
United Kingdom0.697
United States1
Uruguay22.553
Uzbekistan1472.271
Vanuatu123.395
Venezuela6.542
Vietnam7790.097
Yemen195.891
Zambia3.818
Zimbabwe1.005
Short description of Geary-Khamis system
This system is valuing the matrix of quantities using the international prices vector. The vector is obtained by averaging the national prices in the participating countries after their conversion into a common currency with PPP and weighing quantities. PPPs are obtained by averaging the shares of national and international prices in the participating countries weighted by expenditure. International prices and PPPs are defined by a system of interrelated linear equations that need to be solved simultaneously. The GK method produces PPPs that are transitive and actual final expenditures that are additive.
Inflation adjusting
When comparing between countries and between years, the international dollar figures may be adjusted to compensate for inflation. In that case, the base year is chosen, and all figures will be expressed in constant international dollars for that specified base year. Researchers must understand, which adjustments are reflected in the data (Marty Schmidt):
•Population adjustments (In which case, figures represent per capita monies)
•Currency exchange rate adjustments (In which case, figures will be expressed in one currency unit (typically US$, International $, € £ or ¥)
•Purchasing power parity adjustments and/or average commodity prices (in which case, figures are typically expressed as International $)
•Inflation adjustments (in which case, figures have been adjusted, based on changes in an inflation index such as the consumer price index, to represent currency for a "base" year, such as 2000).
Description of Geary-Khamis system
Suppose PPPj is the parity of j-th currency with a currency called international dollars, which may reflect any currency, however, US dollar is the most commonly used. Then the international price Pi is defined as an international average of prices of i-th commodity in various countries. Prices in these countries are expressed in their national currencies. Geary-Khamis method solves this by using national prices after conversion into a common currency using the purchasing power parities (PPP). Hence, the international price, Pi of i-th commodity is defined as:
This equation implies that the international price of i-th commodity is calculated by dividing the total output of i-th commodity in all selected countries, converted in international dollars, using purchasing power parities, by the total quantity produced of i-th commodity. Previous equation can be rewritten as follows:
This equation suggests that Pi is weighted average of international prices pij after conversion into international dollars using PPPj. PPPj is by Geary-Khamis system defined through this equation:
The numerator of the equation represents the total value of output in j-th country expressed in national currency, and the denominator is the value of j-th country output evaluated by repricing at international prices Pi in international dollars. Then PPPj gives the number of national currency units per international dollar.
Advantages of Geary-Khamis method
Geary-Khamis international dollar is widely used by foreign investors and institutions such as IMF, FAO and World Bank. It has become so widely used because it made possible to compare living standards between countries. Thanks to the international dollar they can see more trustworthy economic situation in the country and decide whether to provide additional loans (or any other investments) to said country, or not. It also offers some comparison of purchasing power parities all around the world (developing countries tend to have higher PPPs). Some traders even use Geary-Khamis method to determine if country´s currency is undervalued or overvalued. Exchange rates are frequently used for comparing currencies, however, this approach does not reflect real value of currency in said country. It is better to include PPP or prices of goods in said country. International dollar solves this by taking into account exchange rates, PPP and average commodity prices. Geary-Khamis method is the best method for comparisons of agricultural outputs.
Criticism of using 1990 US dollars for long run comparisons
Economists and historians use many methods when they want to research economic development in the past. For example, if we take the United States of America and United Kingdom (these two examples were compared many times in various researches), someone may use nominal exchange rates, Lindert and Williamson (2016) used PPP exchange rates and Broadberry (2003) used growth rates using own-country price indices. However, none of them is somehow better than the others (or theoretically justifiable). There is a high probability that these three methods will give three different answers, and, in fact, Brunt and Fidalgo (2018)[4] showed in their paper that: “these three approaches do give three different answers when estimating output levels and growth rates in the US and UK – and they are not only different to one another, but also different to a comparison using the (more theoretically justifiable) chained GK prices.” Even though it is more theoretically justifiable, it does not mean it should be used without considering every aspect of this method. For example, Maddison (2001) used the 1990 international dollar when he examined prices during the time of Christ. Ideally, we would use a price benchmark which is significantly closer to the time of Christ. However, there are no such benchmarks. Another problem is that there is no set of international prices, which we could use for valid cross-country comparisons. Comparing GDP levels across countries using their own prices converted at the nominal exchange rate has no value whatsoever. This approach is quite arbitrary because the exchange rate is determined simply by the supply and demand for currency and these metrics are greatly dependent on the volumes of trade balances. It makes little (or no) sense to value all goods (both traded and non-traded at the nominal exchange rate, especially since the absolute volumes of trades may be small compared to total output in both countries. Economists therefore create PPP exchange rates, deriving the exchange rate by valuing a basket of goods in the two countries at two sets of prices (and expressing them as a ratio afterwards). This allows us to see how much it actually costs to live in said country. Although with this approach emerges another problem. What should we choose to be in the basket? Brunt and Fidalgo (2018) use examples of an English basket in 1775 and Chinese basket in 1775. While the English one would have a lot of wheat, the Chinese one would have a lot of rice. Wheat was quite affordable in England and rice was quite affordable in China, however, if we switch these goods, they both would be relatively expensive. This nicely illustrates how choice of the content of the basket will influence the comparison. Simply by using English basket, China would seem like an expensive place to live and vice versa. Geary-Khamis tries to solve this by estimating a weighted average price of each commodity using the shares of countries in world production to weight the country prices. Another problem emerges when researchers compare countries which have different price structure than the international price structure. Brunt and Fidalgo (2018) show examples of Ireland (which has really similar price structure to the international) and South Africa (which has really different price structure to the international). So, when using domestic and international price indices, Ireland´s growth rates move in very similar direction, but when domestic and international prices are applied to South Africa, they, in fact, move in opposite directions. It is worth noting, that bigger countries tend to have a price index that moves more similarly to the international price index. It is simply because bigger countries have a bigger weight in creation of this index.
See also
References
  1. ^ "International Dollar Geary-Khamis Defined, Examples Explained". Business Case Web Site. 24 February 2016. Retrieved 13 April 2019.
  2. ^ "What is an "international dollar"?". World Bank Data Help Desk. Retrieved 13 April 2019.
  3. ^ Implied PPP conversion rate. National currency per international dollar, IMF DataMapper
  4. ^ https://openaccess.nhh.no/nhh-xmlui/bitstream/handle/11250/2575366/DP%2025.pdf?sequence=1
External links
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Last edited on 16 June 2021, at 03:42
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