Purchasing power parity (PPP)


Currency exchange rate that equalise the purchasing power of different currencies. This means that a given sum of money, when converted into US dollars at the PPP exchange rate (PPP dollars), will buy the same basket of goods and services in all countries. In other words, PPP is the rate of currency conversion which eliminate the differences in price levels among countries. Thus, comparisons between countries reflect only differences in the volume of goods and services purchased.