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The Domestic Price System of Economic Analysis

In: Project Analysis in Developing Countries

Author

Listed:
  • Steve Curry

    (Asian Development Bank)

  • John Weiss

    (University of Bradford)

Abstract

Chapter 5 discussed how all project outputs and inputs can be valued at world prices or world price equivalents to assess their economic value. Economic analyses can be carried out using different units of account or numeraire. As with distance, which can be measured in miles or kilometres, the choice of different units makes the same calculation appear different, but provided equal accuracy is used, the results will be directly equivalent. This chapter considers how the domestic price level can be used to measure economic values, in what we will term a domestic price system. It commences by discussing the conditions under which world and domestic price systems give a numeraire. It then considers the shadow exchange rate, a key parameter in the domestic price system. The detail of how conversion factors for traded and non-traded goods and labour are derived in a domestic price system is discussed, before land and the discount rate are considered briefly. The appendix reworks the irrigation case study from Chapter 5 in a domestic price system.

Suggested Citation

  • Steve Curry & John Weiss, 2000. "The Domestic Price System of Economic Analysis," Palgrave Macmillan Books, in: Project Analysis in Developing Countries, edition 0, chapter 6, pages 137-166, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-37511-6_6
    DOI: 10.1057/9780230375116_6
    as

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