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 (PPS) are an artificial currency unit that eliminates differences in purchasing power, i.e., differences in price levels between countries, by using the corresponding conversion rates (purchasing power parities), thus allowing for meaningful cross-country comparisons.
When expressed in purchasing power standards (PPS), an artificial common reference currency that eliminates general price level differences between countries, it can be seen that, relative to the cost of other goods and services, the price of electricity in Cyprus was the highest in the EU28 , having reached in the second half of 2013 to 28.2 PPS per 100 kWh, while the EU average was 20.7 kWh PPS/ per 100 kWh and in Greece 19.4 PPS / 100 kWh.
In 2012, the gross domestic product (GDP) per capita in Luxembourg, expressed in purchasing power standards (PPS - where one PPS buys the same volume of goods and services in all countries), was more than two and a half times the EU28 average.
AIC is a measure of material welfare of households expressed in Purchasing Power Standards (PPS).
When expressed in purchasing power standards (PPS), an artificial common reference currency that eliminates general price level differences between countries, it can be seen that, relative to the cost of other goods and services, the lowest household electricity prices were found in Finland (12.3 PPS per 100 kWh), Sweden (14.6), Luxembourg (14.7) and France (15.2), and the highest in Portugal (29.3), Germany (28.3), Spain and Romania (both 26.5).
Based on preliminary estimates for 2012, gross domestic product (GDP) per capita expressed in purchasing power standards (PPS(1)) varied from 47% to 271% of the EU27 average across the member states, Eurostat reported, on 19 June.
On the basis of Purchasing Power Standards, it emerges that relative to the cost of other goods and services, electricity for household consumers is most expensive in Slovakia, Romania and Italy, and is about two to three times higher than what the inhabitants of Greece or the United Kingdom have to pay.
Based on preliminary estimates for 2012, gross domestic product (GDP) per capita expressed in purchasing power standards varied from 47% to 271% of the EU27 average across the member states, Eurostat reported.
In 2011, the gross domestic product (GDP) per capita in Luxembourg, expressed in purchasing power standards (PPS), was more than two and a half times the EU27 average, according to Eurostat data published on 13 December.
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.
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.