It is shown how a comparison of price levels across a group of countries can be made by chaining bilateral price indexes across a spanning tree. It is argued that we should use the spanning tree whose resulting multilateral price indexes are least sensitive to the choice of bilateral formula. This minimum-spanning tree can be easily computed using Kruskal's algorithm. Results obtained by chaining Fisher indexes across a minimum-spanning tree are compared with the Penn World Table.

This paper considers the problem of how to construct and reconcile price indexes across space and time. A general taxonomy of panel price index methods, containing four broad classes, is proposed, along with five criteria for discriminating between them. Methods from each of the four classes are then used to compute spatial and temporal price indexes for the 15 countries of the European Union (EU) over the period 1995–2000. Using these panel price indexes, I test whether or not price levels and relative prices converged across the EU over this period.

Reviews the book "Profitability Accounting for Planning and Control," Robert Beyer.