Measures of Purchasing Power

Purchasing power parity measures: advantages and limitations - ODI Background Notes

D iscussion and analysis on international comparison using Purchasing Power Parity (PPP) have been somewhat neglected in recent years. With recent shifts in economic growth and constantly changing poverty dynamics, as well as forthcoming major evaluations of progress on the Millennium Development Goals (MDGs), it is an opportune time to revive the debate. This paper examines what PPP tries to d...

Nonlinear Adjustment Towards Purchasing Power Parity

The Purchasing Power Parity Debate

Our willingness to pay a certain price for foreign money must ultimately and essentially be due to the fact that this money possesses a purchasing power as against commodities and services in that country. On the other hand, when we offer so and so much of our own money, we are actually offering a purchasing power as against commodities and services in our own country. Our valuation of a foreig...

Alternative measures of output in global economic-environmental models: Purchasing power parity or market exchange rates?

The study examines the question of the use of purchasing power parity versus market exchange rates in constructing global economic models. It compares three approaches: MER accounts, world-price PPP accounts, and superlative PPP accounts. It concludes that the best approach is to use superlative PPP accounts. This approach uses cross-sectional PPP measures for relative incomes and outputs and r...

Some Evidence of Purchasing Power Parity

Empirical support for purchasing power parity is mixed with results dependent on the time frame and countries under examination, the methodology employed, attempts to control for aggregation bias in the data, and whether adjustments are made to account for productivity differences across nations. As a central component of macroeconomic thinking, purchasing power parity is battered and battle-wo...