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.

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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.

In ex ante sense; the term ([i.sup.d.sub.t,j] - [i.sup.f.sub.t,j] - [DELTA][s.sup.e.sub.t,j]) is the expected Uncovered Interest Parity (UIP) differential while [[[pi].sup.e,d.sub.t,j] - [[pi].sup.e,f.sub.r,j] - [DELTA][S.sup.e.sub.t,j] is the expected relative Purchasing Power Parity (RPPP) differential.

Is China integrated with her major trading partners: evidence on financial and real integration/Ar kinija integruota su savo pagrindiniais prekybos partneriais: irodymu apie finansinie ir realiaja integracija paieskos

(1978) The Relationship between Absolute and Relative Purchasing Power Parity. Review of Economics and Statistics 60: 562-568.

A correct test of purchasing power parity: the case of Pak-rupee exchange rates

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