Was Purchasing Power Parity?

Purchasing power parity (PPP) is a popular metric used by macroeconomic analysts that compares different countries' currencies through a "basket of goods" approach. Purchasing power parity (PPP) allows for economists to compare economic productivity and standards of living between countries.

What is purchasing power parity example?

For example, if a basket consisting of 1 computer, 1 ton of rice, and 1 ton of steel was 1800 US dollars in New York and the same goods cost 10800 HK dollars in Hong Kong, the PPP exchange rate would be 6 HK dollars for every 1 US dollar.

What does high PPP mean?

If international productivity differences are greater in the production of tradable goods than in the production of non-tradable goods, the currency of the country with the higher productivity will appear to be overvalued in terms of purchasing power parity.