The Wrong Way to Compare Economic Size
At the European Central Bank’s annual research conference, Paul Krugman concluded that, when it comes to “weaponized interdependence,” the EU is more powerful than both the US and China. But his reliance on…
Ng Han Guan/Pool/AFP via Getty Images The Wrong Way to Compare Economic Size Oct 26, 2026 Jeffrey Frankel At the European Central Bank’s annual research conference, Paul Krugman concluded that, when it comes to “weaponized interdependence,” the EU is more powerful than both the US and China. But his reliance on PPP-adjusted GDP as a way to smooth out the volatility of nominal exchange rates ignores the even greater swings in PPP data.
CAMBRIDGE—Last month, the Nobel laureate economist Paul Krugman gave a talk at the European Central Bank’s annual research conference , which focused on geoeconomics . The term refers to countries’ ability to exploit economic interactions for geopolitical ends. Think of China’s threats to cut off trading partners from its exports of rare-earth minerals.
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