Relative purchasing power parity

Also found in: Acronyms.

Relative purchasing power parity (RPPP)

Idea that the rate of change in the price level of commodities in one country relative to the price level in another determines the rate of change of the exchange rate between the two countries' currencies.

Relative Purchasing Power Parity

A theory that the purchasing power of two currencies differs by the same proportional rate. This differs from the absolute form of purchasing power parity, which states that the purchasing power between two currencies is the same. However, the concepts are similar because RPPP holds that the absolute form would be true if there were no interference of taxes, quality of products, and other circumstances that change the market. One must take into account all these circumstances to calculate the proportional rate by which the purchasing power changes.
References in periodicals archive ?
2006) the evidence of real market integration exists when relative purchasing power parity holds while there is evidence for financial integration where uncovered interest parity holds.
t,j] is the expected relative Purchasing Power Parity (RPPP) differential.
The above equations imply that a necessary condition for real interest parity to hold is that uncovered interest parity and relative purchasing power parity have to hold simultaneously.

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