PPP (Purchasing Power Parities)

PPP is an exchange (conversion) rate. PPPs are obtained by comparing the prices levels for a basket of comparable goods and services that is selected to be representative for consumption paterns in the various countries. PPPs convert every national monetary unit into a common reference unit, the purchasing power standard (PPS), of which every unit can buy the same amount of goods and services across the countries. PPSs indicate, for the various countries, the national currency units needed to purchase the same basket of goods and services. One PPP USD has the same purchasing power in the domestic economy as one USD in the USA. The PPP method involves the use of standardized international dollar price weights, which are applied to the quantities of final goods and services produced in a given economy. The number of units of a country's currency required to buy the same amounts of goods and services in the domestic market as one USD would buy in the USA. PPP data are from the UN International Comparison Programme (ICP).