Choosing GDP and Currency Conventions for Corporate Scale Models

Summary

The document asks how to construct a corporate revenue-to-world-GDP variable for a model of firm size. It compares current-dollar GDP, which converts contemporaneous local-currency values into USD, with constant-price GDP, which adjusts for inflation. The researcher is considering annual exchange rates for multinational company revenues and World Bank GDP, or deflating each firm's reported revenue using the relevant currency's consumer price inflation before comparison with constant-dollar GDP.

The material identifies a real measurement choice: nominal ratios preserve values at each year's exchange rates and prices, while constant-price ratios aim to isolate changes in real scale. However, the document is a question rather than a resolved method. It gives no answer about the appropriate GDP series, currency conversion convention, treatment of consolidated multinational revenues, or whether CPI is an adequate deflator for company revenue. Those choices should be aligned across numerator and denominator and with the model's intended interpretation; the text itself supplies no empirical comparison or recommendation.

Key ideas

• Current-dollar and constant-price GDP answer different measurement questions.
• A nominal revenue-to-GDP ratio requires consistent currency conversion and period conventions.
• Deflating company revenues with CPI is proposed, but the document does not establish that CPI is the right firm-level deflator.
• The question offers alternative measurement approaches without reporting a conclusion or evidence comparing them.

Tags

# Measuring corporate size relative to world GDP


# Measuring corporate size relative to world GDP












I'm working o a model where corporate revenue / world GDP is a dependent variable of some stuff (based on the model proposed in this paper: http://www.scielo.br/scielo.php?pid=S1807-76922009000200002&script=sci_abstract)

Thing is, I'm not an Economist, so I'm not sure exactly which measures of GDP to use.

On the World Bank website there are four GDP measures: Constant 2010 USD, Current USD, Constant LCU and current LCU.

The companies operate in different currencies and are multinationals, so I was thinking about converting revenues to USD by each year's exchange rate (as recorded by OECD) and dividing it by Current USD GDP values provided by the World Bank.

Does this make sense?

The other way I was thinking is taking constant 2010 USD GDP and inflate/deflate revenues based on CPI Growth (as recorded by OECD) for each currency used in the consolidated income statements of the companies (some companies use Euros and others Yen).

Which one of these would make more sense? If neither one, how would you do it?

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