purchasing power parity

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Purchasing power parity

The notion that the ratio between domestic and foreign price levels should equal the equilibrium exchange rate between domestic and foreign currencies.

Purchasing Power Parity

The theory stating that, in an efficient market, the exchange rate of two currencies results in equal purchasing power. That is, if one pound is worth two dollars, one pound in England should buy the same amount in goods and services that two dollars can buy in the United States. Fixed exchange rates, taxes, and other inefficiencies are thought to disrupt purchasing power parity. Some theorists believe the idea holds most true when comparing countries or regions with similar standards of living.

purchasing power parity

the tendency for the EXCHANGE RATE between the currencies of two countries to reflect long-term differences in the INFLATION rates of these countries under a FLOATING EXCHANGE RATE SYSTEM. Thus, for example, if the inflation rate in country A were 10% per annum and that of country B 6% per annum, then in order to maintain parity between the PURCHASING POWER of the two currencies, country A's currency would have to depreciate by 4% against country B's currency.
References in periodicals archive ?
Purchasing power standards is an economic theory and a technique used to determine the relative value of currencies.
Purchasing power standards (PPS) are an artificial currency unit that eliminates differences in purchasing power, i.
The National Electricity Company for instance estimates that the local economy needs power supplies of 468 KWh for producing EUR 1,000 of GDP in purchasing power standards last year as compared to 234 KWh in the EU-15.
But all this will come as little relief to Cypriot households, who continue to pay the most expensive electricity in the EU, both in terms of kilowatt-hours and in terms of purchasing power standards.
The GDP per capita of Bulgaria's Severozapaden region, expressed in terms of purchasing power standards, was 26% of the EU27 average in 2010, according to data of the statistical office of the European Union.
When expressed in purchasing power standards (PPS) the lowest household electricity prices were found in Finland (12.
Bulgaria's GDP per capita expressed in purchasing power standards is expectedly the lowest in the EU, amounting to just 46% of the average for the block for 2011.
In the period of 2010-2012 the goss domestic product (GDP) per capita expressed, in purchasing power standards (PPS) and the actual individual consumption (AIC) per capita has decreased in Cyprus, while in Greece it marked a significant shrinkage due the economic crisis.
Severozapaden's GDP per inhabitant expressed in terms of purchasing power standards was 28% of the EU average in 2008.

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