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General TradingP
Purchasing Power Parity
An economic theory stating that exchange rates should adjust so that identical goods cost the same in all countries when priced in a common currency. Used to compare the relative value of currencies.
Example
“According to the Big Mac Index, a popular PPP benchmark, if a Big Mac costs $5.50 in the US and £4.50 in the UK, PPP implies a fair exchange rate of about 1.22 USD/GBP.”