Purchasing Power Parity (PPP)

Purchasing power parity (PPP) theory, which attempts to quantify the inflation- exchange rate relationship.

It refers to the theory suggesting that exchange rates will adjust over time to reflect the differential in inflation rates in the two countries; in this way , the purchasing power of consumers when purchasing domestic goods will be the same as that when they purchase foreign goods.

In investopedia, "PPP an economic theory that estimates the amount of adjustment needed on the exchange rate between countries in order for the exchange to be equivalent to each currency's purchasing power."

Share it:  Cite

More from this Section

  • Dwelling Property
    Dwelling Property is a property insurance policy that insures the dwelling, other structures, ...
  • Title Deeds
    Title Deeds are documents which prove who owns a property and under what term ...
  • Hedge
    A hedge is a transaction, which lowers risk. There are number of ways to design hedges ...
  • Project loans
    Project loans is the credit designed to finance the construction of fixed assets associated ...
  • Particular average
    Particular average is an ocean marine loss that falls entirely on a particular interest ...