Wednesday, February 18, 2009

The wrong chart which misleads

(via Big Picture) WaPo has a chart showing how Japan has fallen behind in the past 2 decades. viz, it was #4 in GDP/cap (nominal) in 1992 and "now" only #20. Unfortunately there are two problems, (1) it used nominal currency which depends on the very volatile exchange rate figure; (2) it used 2007 figure.

I made a simple estimate, using the 2007 number given by WaPo (i.e. assuming the same GDP/cap growth in the past 14 months, which could vary by a few percentage points ), and applied the difference in exchange rate taken from charts in yahoo. Now Japan climbed back to #3 as a result of the recent exchange rate hike. (ignoring those behind #10 in 2007 ranking, which seems reasonable as no other country has seen such significant appreciation in exchange)

For developed countries it is always more "stable" to use PPP, for which Japan is still around #20 in 2008 (17 in World bank rank, which excludes non-sovereign entities such as HK, consistent with the charts WaPo has been using, which excluded HK). So I do not challenge WaPo's assertion, but its reasoning and choice of data is questionable.

p.s. I do not have the GDP/cap ranking for Japan in PPP in 1992, but I believe it is in the teens, so Japan's rank in GDP/cap(PPP), i.e. living standard, did not change that much. (it was 20520, vs 24700 of USA)

p.s.2 PPP is not as reliable when comparing the economy of developing countries, though in longer time span it is more stable -- which I had chosen when I studied China's growth a few years ago

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