Purchasing Power Parity

Summary of Purchasing Power Parity

An equal relationship of prices between two countries. Price levels in both countries are substantially the same, considering the rate of exchange.

(Main Author: William J. Miller)

Purchasing Power Parity (PPP) in International Trade

Meaning of Purchasing Power Parity (PPP), according to the Dictionary of International Trade (Global Negotiator): An economic theory that estimates the amount of adjustment needed on the exchange rate between countries in order for the exchange to be equivalent to each currency’s purchasing power. The PPP is calculated as: S = P1 / P2, where “S” represents exchange rate of currency 1 to currency 2; P1 represents the cost of good X in currency; and P2 represents the cost of good X in currency 2.

Hierarchical Display of Purchasing power parity

Economics > National accounts > Income > Purchasing power

Purchasing power parity

Concept of Purchasing power parity

See the dictionary definition of Purchasing power parity.

Characteristics of Purchasing power parity

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Resources

Translation of Purchasing power parity

• Spanish: Paridad de poder adquisitivo
• French: Parité de pouvoir d\’achat
• German: Kaufkraftparität
• Italian: Parità di potere d\’acquisto
• Portuguese: Paridade do poder de compra
• Polish: Parytet siły nabywczej

Thesaurus of Purchasing power parity

Economics > National accounts > Income > Purchasing power > Purchasing power parity

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