Purchasing Power Parity (PPP)

Conversion method holding that identical baskets should cost the same everywhere once exchange rates adjust.

Specifications & Metrics

type

Coincident

frequency

ICP survey rounds (every few years)

publisher

World Bank International Comparison Program

Core Principles & Analysis

• Gustav Cassel popularized PPP after World War I as a test for misaligned exchange rates.
• The ICP's survey rounds produce the PPP conversion rates behind the World Bank's global poverty lines.
• PPP comparisons change rankings: large developing economies look far larger at PPP than at market rates.

Sources

• World Bank: International Comparison Program