PPP Versus Mer: Searching for Answers in a Multi-Dimensional Debate

15-03-2006 | Publication

Consistent with most of the existing literature, the economic growth in most of the SRES (Special Report on Emission) scenarios and their regions were reported in US dollars based on conversions using market-exchange rates (MER). In 2003, however, the use of MER-based economic projections in SRES were subject to criticism. The main thrust of this criticism is linked to the assumption made in (some of) the SRES scenarios that relative income per capita levels across regions partially converge over the scenario horizon. According to the critics, the per capita income should be compared by using purchasing power parities (PPP) to more properly compare the actual welfare levels in the different regions.