Purchasing power parity PPP economic texts that are somehow known economic indicator that is
International organizations such as the UN, the World Bank and the International Monetary Fund for the ranking and comparison of per capita income and gross domestic product of countries. Same with the purchasing power parity indices to
The purchasing power of different currencies and precious surfaces to remove differences in the various countries of indicators
For comparable countries.
purchasing power parity world bank
In fact, the purchasing power parity theory expressing the relationship between the ratio of long-term prices and exchange rates in an economy
Shows open and it cannot be used to determine the exchange rate in countries. However, the more
The difference between the index of the purchasing power parity and exchange rate market is meant to be more significant inflation in the country. This is the incident that this difference in developing countries and the transition is more than
The developed countries.
In this summary document about one of the currencies exchange rate calculation, advanced theories estimate Rune is gone.
Of the most important ratios in assessing the economic situation of the two countries and to compare the ratio of the amount payable to a common currency basket of similar goods. In other words, A consumer country in comparison with the consumption of
B a country for the preparation of one or more products, similar to what the amount of money paid. These indicators in addition to explaining the relative status of living standards in different countries, in order to determine the amount of economic power and competitiveness of the economy, set the exchange rate of the national currency, to facilitate the comparison of macroeconomic statistics such as GDP etc. Also can be used. This ratio is called the purchasing power parity (Purchasing Power Parity) and briefly known as PPP. The theory of purchasing power parity of the fact that economic support the price of a basket of goods the same in both countries desire for convergence and equality. This convergence and balance based on the principle of observance of the basic defaults, such as free trade and the lack of involvement of non-economic factors in the mbalat of goods between the two countries.
Calculation and assessment of the need to determine the substantial reliance PPP index basket of goods similar to the usage in both countries about the comparison, selection of the same commodity basket to any selected goods – the same quality and quantity of features has been rated the same as the unit of measurement, and also the type of relationship between the two countries with a consumption of goods in the community
The main challenge is the same calculation.
To simplify and approximate evaluation of PPP can be found from the Big Mac Index Index.
Assume that the same consumer goods (KFC pizza) in the country
2 dollars and British pounds for the purchase of 1.5 in the country money, pizza
The ratio of 1.5 to 2 pounds against the dollar would be 0.75. X 0.75 in comparison with currency exchange
American (USD) and the British currency (pounds) is bigger, for instance, that is 0.62 and this concept is that pizza
In the UK, McDonald’s is more expensive than American, and if we want a simple basis and only on the basis of indicators
We have to say (KFC pizza):
The purchasing power of the American people more than the country of England.
Can the American economy more competitiveness of the British economy.
The American standard of living in the country, most of the British nation.
The country’s currency exchange rates to the British country seem logical.