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 ?
Labour productivity per person employed is a frequently used indicator for productivity and it is measured by GDP in purchasing power standards per person employed relative to the EU (EU = 100).
In comparison, the GDP per capita in Luxembourg expressed in purchasing power standards was more than two and a half times the EU27 average.
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.
When expressed in purchasing power standards (PPS) the lowest household electricity prices were found in Finland (12.
In 2009, GDP per capita expressed in purchasing power standards in the EU27 271 NUTS-2 regions ranged from 27% of the Union average in the region of Severozapaden (Bulgaria) to 332% of this average in Inner London (United Kingdom).
Severozapaden's GDP per inhabitant expressed in terms of purchasing power standards was 28% of the EU average in 2008.
In 2010, the gross domestic product (GDP) per capita in Luxembourg, expressed in purchasing power standards (PPS)(1) was more than two and a half times the EU27 average, said Eurostat, on 13 December.
CYPRUS' Gross Domestic Product (GDP) per inhabitant in purchasing power standards (PPS) reached 96 points in 2008, with 100 points being the EU27 average.
He pointed out the Bulgarian GDP per capita expressed in Purchasing Power Standards is 43% of the EU average, while Romania's is just 2% higher, according to Eurostat.
Based on the data for 2007, GDP per inhabitant in Cyprus, expressed in purchasing power standards (PPS), was 91 per cent, only nine per cent below EU27 average recording a slight increase compared to the 90 per cent in 2006 though it is lower than the 93 per cent estimated in June based on Eurostat first preliminary estimates for 2007.
Based on preliminary estimates for 2010, gross domestic product (GDP) per capita expressed in purchasing power standards (PPS - an artificial currency unit that eliminates price level differences between countries) ranged from 43% to 283% of the EU27 average across the member states, Eurostat reported, on 21 June.
Bulgaria's GDP per capita expressed in Purchasing Power Standards is 57% below the EU 27 average, according to Eurostat's preliminary data for 2010.