Three sources of PPPs for the FSU were available: as-yet unpublished results of ICP's 1990 exercise linking the FSU to Austria;<sup>9</sup> the 1988 multilateral exercise of the CMEA (see CMEA 1990)10; or a 1976 bilateral comparison performed by the U.S. Government, updated by US price trends (see US JEC 1981). A fourth possibility, a German-FSU comparison<sup>with</sup> a 1988 base, is known to exist but has proven difficult to obtain. In choosing among the available sources, there were strong a _priori_ grounds for relying on ICP; however, the 1990 results of the FSU-Austria comparison proved too partial and tenuous. Hence, pending more complete ICP results for 1990, attention had to focus on the CMEA study, linked with the 1985 ICP exercise by common reporters. Poland was a full reporter in both PPP exercises and serves as the main linkage country. Partial reports for Hungary and Yugoslavia in the CMEA report serve to corroborate the results.

Dollar GNP estimates higher than those obtained by using even the official exchange rate, notably those compiled by US Government, arise from PPP comparisons with advanced economies. This study takes the position that these calculations come in so high mainly because of underlying differences in the treatment of quality and diversity of goods and services. This is usually discussed as a problem of deteriorating quality in HPEs but the case is made here that the problem is as much one of imputing to HPEs the kind of improving quality and diversity that is taken for granted in dynamic countries, but not fully washed out of OECD price measures."1

# b. Attempts Using Regressions

For such reasons, PPP-:tased estimates cannot be slipped directly into a set of _Atlas-type_ estimates. The reasons for systemic differences in these scales, which seem to depend heavily on level of development, are discussed extensively in the literature. What is relevant here is that some form of regression is usually run on _Atlas_ estimates to express them on an ICP scale, or 91tem prices (plus separate notation of so-called quality adjustments) from 1985 comparisons with Hungary, Poland, and Yugoslavia as well as from the 1990 exercise with the FSU are in hand. The remaining details from the 1990 exercise (which also covers Czechoslovaki **a** nd perhaps Romania) should be available by end-1992, as soon **as** Austria has evaluated and processed the incoming data. I lTwo additional bilateral exercises were performed by the FSU, one with Hungary based on 1985 and the other with West Germany **based** on 1988. Summary results of the Hungary-FSU exercise were reviewed.

**'IFor** example, the Volga passenger car that figured in the CIA's 1976 bilateral **US-FSU** comparison<sup>is basically</sup> the same as the passenger car used in ICP's Austria-FSU comparison for 1990. The ruble price for individual<sup>FSU cars</sup> is virtually the same in each comparison, which conforms with the fixity of **planned** prices. While the Austrian comparison of 1990 actually **uses** the same vehicle, the CIA comparison had to match the Volga with some US car. But any US comparator car of 1990 is fundamentally different from any comparator car of<sup>1976, in ways that are</sup> ambiguously **treated** in price indicators of the US and other dynamic economies. Classic proofs **concern** the<sup>introduction</sup> of catalytic convertors, which can be regarded as a quality improvement or a cost increase **for**<sup>the same</sup><sup>**tranwportation**</sup> *service and the change in consumer preference in favor of lighter vehicles as energy costs rise. **These** considerations, and derivative issues like increased investment costs when retooling is the norm, were not relevant in the FSU of 1976-90 and so can distort US but not FSU data, per se.

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