Bangladesh is listed at 36th best country when it comes about PPP GDP but 155th when nominal GDP is considered. So, if I want to know the real economy state of a country, which one should I look at? The nominal GDP or, the PPP GDP?
And what other factors should I look at if I want to know about the economical prospect of a country?
Your valuable answers will be great to know. Thank you in advance
If you are focused on living standars the right variable to take into account is PPP gdp. It includes information about how much products and services the population can afford.
However, if your aim os studying international trade or production I would use nominal GDP as it allows comparing production in the same units.
If you want to study welfare I would use HDI (human development índex) that includes other variables un addition to consumption.
Dr. Juan Luis Santos
Thank you very much for your valuable comments
Best Regards
The question on PPP comparison is complex, depending on the data base you are using. The founders of the Penn World Table have researched this method thoroughly. I attach one of their articles.
A rule of thumb for understanding GDP’s PPP and nominal is that PPP is how much of a local good (like real estate, labor, or locally grown produce) a person can buy in their country, and nominal is roughly how much of an internationally traded good (diamonds, DVD players, Snickers bars) a person can buy in their country.See:
https://applebutterdreams.wordpress.com/the-difference-between-gdp-nominal-and-gdp-ppp/
http://en.wikipedia.org/w/index.php?title=Gross_domestic_product&redirect=no#Nominal_GDP_and_adjustments_to_GDP
http://en.wikipedia.org/wiki/Purchasing_power_parity
Dear Dr. Lall B. Ramrattan and Mr. Hussein Elasrag
Thank you very much for your valuable comments and the list of articles you provided. My background and working area is Electrical Engineering, so I do not have have the basic knowledge of Economics. So, special thanks for providing me this articles, I can start learning.
Till now, what I have understood, as Mr. Hussein said, " PPP is how much of a local good (like real estate, labor, or locally grown produce) a person can buy in their country, and nominal is roughly how much of an internationally traded good (diamonds, DVD players, Snickers bars) a person can buy in their country."
For example, both Bangladesh and India's position is higher in the list made with PPP-GDP, but the very opposite when the nominal GDP is considered. So, with that can we tell that, Both of these countries are almost self dependant when peoples' daily life consumption is considered as they can buy local goods with low price. On the other hand, as they have local goods, the alternative imported products should be high-taxed by th eGov, hence should be expensive and difficult for people to buy and hence, the nominal GDP falls down. Am I right with the justification?
It would be great to know your thinking
Thank you very much again for your kind help for understading this topic.
Best Regards
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