Purchasing power parity - Knowledge (XXG)

630:, expressed in international dollars. These national poverty lines are converted to international currency and the global line is converted back to local currency using the PPP exchange rates from the ICP. PPP exchange rates include data from the sales of high end non-poverty related items which skews the value of food items and necessary goods which is 70 percent of poor peoples' consumption. Angus Deaton argues that PPP indices need to be reweighted for use in poverty measurement; they need to be redefined to reflect local poverty measures, not global measures, weighing local food items and excluding luxury items that are not prevalent or are not of equal value in all localities. 662:

instability in the peaceful time (and that is what the abandoning of the gold standard during the war was blamed for). Gustav Cassel was among those who supported the idea of restoring the gold standard, although with some alterations. The question, which Gustav Cassel tried to answer in his works written during that period, was not how exchange rates are determined in the free market, but rather how to determine the appropriate level at which exchange rates were to be fixed during the restoration of the system of fixed exchange rates.

540:, falling into the second category, and drifting from the PPP exchange rate to the currency exchange rate. Even if the PPP "value" of the Ethiopian currency is three times stronger than the currency exchange rate, it will not buy three times as much of internationally traded goods like steel, cars and microchips, but non-traded goods like housing, services ("haircuts"), and domestically produced crops. The relative price differential between tradables and non-tradables from high-income to low-income countries is a consequence of the 580:

costs increase, the larger the range of exchange rate fluctuations. The same is true for official trade restrictions because the customs fees affect importers' profits in the same way as shipping fees. According to Krugman and Obstfeld, "Either type of trade impediment weakens the basis of PPP by allowing the purchasing power of a given currency to differ more widely from country to country." They cite the example that a dollar in London should purchase the same goods as a dollar in Chicago, which is certainly not the case.

1470: 108:, that is, many goods with different quantities. PPP then computes an inflation and exchange rate as the ratio of the price of the basket in one location to the price of the basket in the other location. For example, if a basket consisting of 1 computer, 1 ton of rice, and half a ton of steel was 1000 US dollars in New York and the same goods cost 6000 HK dollars in Hong Kong, the PPP exchange rate would be 6 HK dollars for every 1 US dollar. 650:. While Gustav Cassel's use of PPP concept has been traditionally interpreted as his attempt to formulate a positive theory of exchange rate determination, the policy and theoretical context in which Cassel wrote about exchange rates suggests different interpretation. In the years immediately preceding the end of WWI and following it economists and politicians were involved in discussions on possible ways of restoring the 2564: 568:

countries have more labor relative to capital, so marginal productivity of labor is greater in rich countries than in poor countries. Nontradables tend to be labor-intensive; therefore, because labor is less expensive in poor countries and is used mostly for nontradables, nontradables are cheaper in poor countries. Wages are high in rich countries, so nontradables are relatively more expensive.

1415: 1615:, however, each iPad is produced in the same place (except for the model sold in Brazil) and all iPads (within the same model) have identical performance characteristics. Price differences are therefore a function of transportation costs, taxes, and the prices that may be realized in individual markets. In 2013, an iPad cost about twice as much in Argentina as in the United States. 2049: 1339: 374:

market exchange rate is artificially weak. In such cases, a PPP exchange rate is likely the most realistic basis for economic comparison. Similarly, when exchange rates deviate significantly from their long term equilibrium due to speculative attacks or carry trade, a PPP exchange rate offers a better alternative for comparison.

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exchange rate is 3.58 HK$ per US$ . The difference between this and the actual exchange rate of 7.83 suggests that the Hong Kong dollar is 54.2% undervalued. That is, it is cheaper to convert US dollars into Hong Kong dollars and buy a Big Mac in Hong Kong than it is to buy a Big Mac directly in US dollars.

462:"bridging" methods, which do not fully take into account differing quality between goods, it may serve to overstate the PPP basis of poorer countries, because the price indexing on which PPP is based will assign to poorer countries the greater weight of goods consumed in greater shares in richer countries. 1162: 1529:

uses The Big Mac Index to identify overvalued and undervalued currencies. That is, ones where the Big Mac is expensive or cheap, when measured using current exchange rates. The January 2019 article states that a Big Mac costs HK$ 20.00 in Hong Kong and US$ 5.58 in the United States. The implied PPP

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The corporate cost advantage is nothing more sophisticated than access to cheaper workers, but because the pay of those workers goes farther in low-income countries than high, the relative pay differentials (inter-country) can be sustained for longer than would be the case otherwise. (This is another

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Linking regions presents another methodological difficulty. In the 2005 ICP round, regions were compared by using a list of some 1,000 identical items for which a price could be found for 18 countries, selected so that at least two countries would be in each region. While this was superior to earlier

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There are some problems with the Big Mac Index. A Big Mac is perishable and not easily transported. That means the law of one price is not likely to keep prices the same in different locations. McDonald's restaurants are not present in every country, which limits the index's usage. Moreover, Big

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His recommendation was to fix exchange rates at the level corresponding to the PPP, as he believed that this would prevent trade imbalances between trading nations. Thus, PPP doctrine proposed by Cassel was not really a positive (descriptive) theory of exchange rate determination (as Cassel was

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of the exchange rates computed for individual goods. The EKS-S method (by Éltető, Köves, Szulc, and Sergeev) uses two different baskets, one for each country, and then averages the result. While these methods work for 2 countries, the exchange rates may be inconsistent if applied to 3 countries, so

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Measurement of price levels differ from country to country. Inflation data from different countries are based on different commodity baskets; therefore, exchange rate changes do not offset official measures of inflation differences. Because it makes predictions about price changes rather than price

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The IMF considers that GDP in purchase-power-parity (PPP) terms is not the most appropriate measure for comparing the relative size of countries to the global economy, because PPP price levels are influenced by nontraded services, which are more relevant domestically than globally. The IMF believes

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assumes that the exchange rate between two currencies actually observed in the different international markets is the one that is used in the purchasing power parity comparisons, so that the same amount of goods could actually be purchased in either currency with the same beginning amount of funds.

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measured in dollars will also halve. However, this exchange rate results from international trade and financial markets. It does not necessarily mean that Mexicans are poorer by a half; if incomes and prices measured in pesos stay the same, they will be no worse off assuming that imported goods are

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Nontradables are primarily services and the output of the construction industry. Nontradables also lead to deviations in PPP because the prices of nontradables are not linked internationally. The prices are determined by domestic supply and demand, and shifts in those curves lead to changes in the

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The law of one price is weakened by transport costs and governmental trade restrictions, which make it expensive to move goods between markets located in different countries. Transport costs sever the link between exchange rates and the prices of goods implied by the law of one price. As transport

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The Bhagwati–Kravis–Lipsey view provides a somewhat different explanation from the Balassa–Samuelson theory. This view states that price levels for nontradables are lower in poorer countries because of differences in endowment of labor and capital, not because of lower levels of productivity. Poor

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Thus, it is necessary to make adjustments for differences in the quality of goods and services. Furthermore, the basket of goods representative of one economy will vary from that of another: Americans eat more bread; Chinese more rice. Hence a PPP calculated using the US consumption as a base will

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In the white paper, "Burgernomics", the authors computed a correlation of 0.73 between the Big Mac Index's prices and prices calculated using the Penn World Tables. This single-good index captures most, but not all, of the effects captured by more professional (and more complex) PPP measurement.

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For example, in 2005 the price of a gallon of gasoline in Saudi Arabia was US$ 0.91, and in Norway the price was US$ 6.27. The significant differences in price would not contribute to accuracy in a PPP analysis, despite all of the variables that contribute to the significant differences in price.

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for a particular good, then the price for that good should be the same at every location. Ideally, a computer in New York and in Hong Kong should have the same price. If its price is 500 US dollars in New York and the same computer costs 2,000 HK dollars in Hong Kong, PPP theory says the exchange

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PPP exchange rates are especially useful when official exchange rates are artificially manipulated by governments. Countries with strong government control of the economy sometimes enforce official exchange rates that make their own currency artificially strong. By contrast, the currency's black

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The stability of exchange rates was widely believed to be crucial for restoring the international trade and for its further stable and balanced growth. Nobody then was mentally prepared for the idea that flexible exchange rates determined by market forces do not necessarily cause chaos and

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If one country's GDP is converted into the other country's currency using PPP exchange rates instead of observed market exchange rates, the false inference will not occur. Essentially GDP measured at PPP controls for the different costs of living and price levels, usually relative to the United

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Linkages between national price levels are also weakened when trade barriers and imperfectly competitive market structures occur together. Pricing to market occurs when a firm sells the same product for different prices in different markets. This is a reflection of inter-country differences in

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The value of the PPP exchange rate is very dependent on the basket of goods chosen. In general, goods are chosen that might closely obey the law of one price. Thus, one attempts to select goods which are traded easily and are commonly available in both locations. Organizations that compute PPP

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Measuring income in different countries using PPP exchange rates helps to avoid this problem, as the metrics give an understanding of relative wealth regarding local goods and services at domestic markets. On the other hand, it is poor for measuring the relative cost of goods and services in

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The Big Mac has the value of being a relatively standardized consumer product that includes input costs from a wide range of sectors in the local economy, such as agricultural commodities (beef, bread, lettuce, cheese), labor (blue and white collar), advertising, rent and real estate costs,

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international markets. The reason is it does not take into account how much US$ 1 stands for in a respective country. Using the above-mentioned example: in an international market, Mexicans can buy less than Americans after the fall of their currency, though their GDP PPP changed a little.

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According to the table, an American living or travelling in Switzerland on an income denominated in US dollars would find that country to be the most expensive of the group, having to spend 27% more US dollars to maintain a standard of living comparable to the US in terms of

454:, because teff is not commercially available in Thailand and rice is not in Ethiopia, so the price of rice in Ethiopia or teff in Thailand cannot be determined. As a general rule, the more similar the price structure between countries, the more valid the PPP comparison. 408:

may be greater than the difference in housing prices, while also less than the difference in entertainment prices. People in different countries typically consume different baskets of goods. It is necessary to compare the cost of baskets of goods and services using a

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For example, the average price of KFC's Original 12 pc. Bucket in the United States in January 2016 was $ 20.50; while in Namibia it was only $ 13.40 at market exchange rates. Therefore, the index states the Namibian dollar was undervalued by 33% at that time.

365:. Theories that invoke purchasing power parity assume that in some circumstances a fall in either currency's purchasing power (a rise in its price level) would lead to a proportional decrease in that currency's valuation on the foreign exchange market. 236:

and consumption and other places where the prices of non-traded goods are considered important. (Market exchange rates are used for individual goods that are traded). PPP rates are more stable over time and can be used when that attribute is important.

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Since global PPP estimates—such as those provided by the ICP—are not calculated annually, but for a single year, PPP exchange rates for years other than the benchmark year need to be extrapolated. One way of doing this is by using the country's

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perfectly aware of numerous factors that prevent exchange rates from stabilizing at PPP level if allowed to float), but rather a normative (prescriptive) policy advice, formulated in the context of discussions on returning to the gold standard.

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PPP exchange rates are never valued because market exchange rates tend to move in their general direction, over a period of years. There is some value to knowing in which direction the exchange rate is more likely to shift over the long run.

443:(ICP), which PPP estimates are based on, require the disaggregation of national accounts into production, expenditure or (in some cases) income, and not all participating countries routinely disaggregate their data into such categories. 424:

there is no way to reduce complexity to a single number that is equally satisfying for all purposes. Nevertheless, PPPs are typically robust in the face of the many problems that arise in using market exchange rates to make comparisons.

1334:{\displaystyle {\textrm {PPPrate}}_{X,i}={\frac {{\textrm {PPPrate}}_{X,b}\cdot {\frac {{\textrm {GDPdef}}_{X,i}}{{\textrm {GDPdef}}_{X,b}}}}{{\textrm {PPPrate}}_{U,b}\cdot {\frac {{\textrm {GDPdef}}_{U,i}}{{\textrm {GDPdef}}_{U,b}}}}}} 698:

to exchange rates. The OECD table below indicates the number of US dollars needed in each of the countries listed to buy the same representative basket of consumer goods and services that would cost US$ 100 in the United States.

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way of saying that the wage rate is based on average local productivity and that this is below the per capita productivity that factories selling tradable goods to international markets can achieve.) An equivalent

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are more stable and are less affected by tariffs, they are used for many international comparisons, such as comparing countries' GDPs or other national income statistics. These numbers often come with the label

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PPP levels will also vary based on the formula used to calculate price matrices. Possible formulas include GEKS-Fisher, Geary-Khamis, IDB, and the superlative method. Each has advantages and disadvantages.

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fluctuate substantially, when the GDP of one country measured in its own currency is converted to the other country's currency using market exchange rates, one country might be inferred to have higher

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Poverty, tariffs, transportation, and other frictions prevent the trading and purchasing of various goods, so measuring a single good can cause a large error. The PPP term accounts for this by using a

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differ from that calculated using China as a base. Additional statistical difficulties arise with multilateral comparisons when (as is usually the case) more than two countries are to be compared.

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Original 12/15 pc. bucket. The Big Mac Index cannot be used for most countries in Africa because most do not have a McDonald's restaurant. Thus, the KFC Index was created by Sagaci Research (a

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Various ways of averaging bilateral PPPs can provide a more stable multilateral comparison, but at the cost of distorting bilateral ones. These are all general issues of indexing; as with other

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in United States. The implied exchange rate is 0.71. The difference between this and the actual exchange rate, 0.93 as of Mid November 2021, suggests the CHF is -22.8% undervalued to the USD.

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among countries. The same product, for instance, can have a different level of quality and even safety in different countries, and may be subject to different taxes and transport costs. Since

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levels, relative PPP is still a useful concept. However, change in the relative prices of basket components can cause relative PPP to fail tests that are based on official price indexes.

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market basket of some goods relative to the foreign price of the same basket. If the prices of nontradables rise, the purchasing power of any given currency will fall in that country.

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Relative PPP is a weaker statement based on the law of one price, covering changes in the exchange rate and inflation rates. It seems to mirror the exchange rate closer than PPP does.

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by purchasing power parity—considerably different from the nominal exchange rate. This discrepancy has large implications; for instance, when converted via the nominal exchange rates,

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provides an overview of methodological issues in calculating PPP and in designing the ICP under which the main PPP tables (Maddison, Penn World Tables, and World Bank WDI) are based.

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and segmented markets results in violations of the law of one price and absolute PPP. Over time, shifts in market structure and demand will occur, which may invalidate relative PPP.

601:, whether the existing market for a prospective entrant's product features few suppliers or instead is already near-saturated). According to Krugman and Obstfeld, this occurrence of 76:

that contains a "final product list covers around 3,000 consumer goods and services, 30 occupations in government, 200 types of equipment goods and about 15 construction projects".

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In addition to methodological issues presented by the selection of a basket of goods, PPP estimates can also vary based on the statistical capacity of participating countries. The

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benefit comes from non-traded goods that can be sourced locally (nearer the PPP-exchange rate than the nominal exchange rate in which receipts are paid). These act as a cheaper

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PPP calculations tend to overemphasise the primary sectoral contribution, and underemphasise the industrial and service sectoral contributions to the economy of a nation.

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countries in contrast to non-traded goods, that is, goods produced for home-country use. Also, currencies are traded for purposes other than trade in goods and services,

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There can be marked differences between purchasing power adjusted incomes and those converted via market exchange rates. A well-known purchasing power adjustment is the

2033:(CPI) and purchasing power parity (PPP) conversion factors share conceptual similarities. The CPI measures differences in levels of prices of goods and services over 2601: 2868: 446:

Some aspects of PPP comparison are theoretically impossible or unclear. For example, there is no basis for comparison between the Ethiopian labourer who lives on

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Kadochnikov, Denis (2013). "Gustav Cassel's purchasing power parity doctrine in the context of his views on international economic policy coordination".

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than is available to factories in richer countries. It is difficult by GDP PPP to consider the different quality of goods among the countries.

1157:. To calculate a country's PPP exchange rate in Geary–Khamis dollars for a particular year, the calculation proceeds in the following manner: 2628: 2485: 1584:. Its advantage compared to the Big Mac Index is that Nespresso capsules are sold in higher numbers compared to a single Big Mac hamburger. 1384: 49:

at one location divided by the price of the basket of goods at a different location. The PPP inflation and exchange rate may differ from the

2689: 2935: 2072: 529:, moving towards the PPP exchange rate. Conversely, category 2 products tend to trade close to the currency exchange rate. (See also 1454: 205:

further adjustment may be necessary so that the rate from currency A to B times the rate from B to C equals the rate from A to C.

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than the other country in one year but lower in the other. Both of these inferences would fail to reflect the reality of their

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Index measures PPP with a basket that contains a single product: An Arpeggio flavored coffee pod produced and retailed by the

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Good report on purchasing power containing a Big Mac index as well as for staples such as bread and rice for 71 world cities.

2794: 2062: 1436: 134:) can contribute to longer-term differences between the two rates. One use of PPP is to predict longer-term exchange rates. 131: 3615: 3404: 3394: 3087: 2054: 541: 413:. This is a difficult task because purchasing patterns and even the goods available to purchase differ across countries. 3554: 3527: 3981: 3962: 3539: 3384: 3350: 3335: 3314: 3309: 489: 476: 2660: 2350:"China's rise, America's demise | beyondbrics | News and views on emerging markets from the Financial Times – FT.com" 3956: 3532: 3222: 3212: 694:(OECD) measures the differences in price levels between its member countries by calculating the ratios of PPPs for 655: 130:

because it reacts to changes in demand at each location. Also, tariffs and differences in the price of labour (see

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Estimation of purchasing power parity is complicated by the fact that countries do not simply differ in a uniform

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There are variations in calculating PPP. The EKS method (developed by Ö. Éltető, P. Köves and B. Szulc) uses the

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and gives a big cost advantage to labour-intensive production of tradable goods in low income countries (like

150: 626:, referred to as the dollar-a-day line. This line represents an average of the national poverty lines of the 3640: 3474: 3464: 3454: 3444: 3182: 3172: 3132: 3122: 3002: 2928: 2760: 1608: 704: 627: 602: 2353: 2276: 3810: 3655: 3515: 3458: 3414: 3377: 3127: 3067: 3042: 3012: 2997: 346: 325: 233: 65: 3625: 37:) is a measure of the price of specific goods in different countries and is used to compare the absolute 4036: 3942: 3600: 3585: 3559: 3498: 3177: 3117: 3097: 3092: 2147: 2037:

within a country, whereas PPPs measure the change in levels of prices across regions within a country.

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says, "Our reference basket of goods is based on European consumer habits and includes 122 positions".

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comes from the idea that, with the right exchange rate, consumers in every location will have the same

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Local, non-tradable goods and services (like electric power) that are produced and sold domestically.

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The PPP exchange-rate calculation is controversial because of the difficulties of finding comparable

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When PPP comparisons are to be made over some interval of time, proper account needs to be made of

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Price indexes, inequality, and the measurement of world poverty Angus Deaton, Princeton University

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The goods that the currency has the "power" to purchase are a basket of goods of different types:

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nominal GDP per capita is around US$ 53,242, but its PPP figure is US$ 46,602, in line with other

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The more that a product falls into category 1, the further its price will be from the currency

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More comparisons have to be made and used as variables in the overall formulation of the PPP.

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Depending on the particular theory, purchasing power parity is assumed to hold either in the

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firm focusing solely on Africa) to identify over- and under-valued currencies in Africa.

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Purchasing power parities updated by Organisation of Cooperation and Development (OECD)

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in 1986 as a way to teach economics and to identify over- and under-valued currencies.

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The global poverty line is a worldwide count of people who live below an international

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The PPP method is used as an alternative to correct for possible statistical bias. The

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The purchasing power parity indicator can be used to compare economies regarding their

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The PPP exchange rate may not match the market exchange rate. The market rate is more

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can influence the purchasing power parity of a country in the international markets.

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exchange rates use different baskets of goods and can come up with different values.

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between places. The calculation of the PPP, according to the OECD, is made through a

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States dollar, enabling a more accurate estimate of a nation's level of production.

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2005 World Development Indicators: Table 5.7 | Relative prices and exchange rates

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The bank UBS produces its "Prices and Earnings" report every three years. The

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There are a number of reasons that different measures do not perfectly reflect

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Purchasing power parities as example of international statistical cooperation

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is a simple implementation of PPP where the basket contains a single good: a

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estimated that in 2003, one Geary–Khamis dollar was equivalent to about 1.8

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1,965 while on a PPP basis, it is about US$ 7,197. At the other extreme,

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To teach PPP, the basket of goods is often simplified to a single good.

2825: 2458: 1612: 1494: 1473: 1439: in this section. Unsourced material may be challenged and removed. 597:, virtually no demand for pork in Islamic states) and the supply side ( 518: 241: 185: 17: 1351:

is the PPP exchange rate of country X for the benchmark year, PPPrate

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whose prices vary more than those of physical goods. Also, different

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term for measuring prices at different locations. It is based on the

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spokeperson, Webber, Jude (2011). China's rise, America's demise.

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is a widely cited source of PPP adjustments, and the associated

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but exclude profits and above all do not consider the different

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is the GDP deflator of country X for the benchmark year, GDPdef

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in the 16th century, and was developed in its modern form by

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Purchasing power parity exchange rate is used when comparing

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23rd Sep 2013, CommSec Economic Insight: CommSec iPad Index

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measures PPP with a basket that contains a single item: a

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List of countries by future GDP (PPP) per capita estimates

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is the PPP exchange rate of country X for year i, PPPrate

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restaurants. The index was created and popularized by

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More processed and expensive products are likely to be

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that GDP at market rates is a more relevant comparison.

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identify manipulation of inflation numbers by Argentina

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provides PPP estimates for a large number of countries

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is the GDP deflator of the US for the benchmark year.

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Organisation for Economic Co-operation and Development

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not essential to the quality of life of individuals.

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Carnegie Council for Ethics in International Affairs

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is the GDP deflator of the US for year i, and GDPdef

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in using exchange rates to outputs among countries.

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European Journal of the History of Economic Thought

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is the GDP deflator of country X for year i, GDPdef

517:that can be sold on the international market (like 101:rate should be 4 HK dollars for every 1 US dollar. 2580:"Purchasing power parities – measurement and uses" 2188:List of countries by past and future GDP (nominal) 2146: 1333: 654:, which would automatically restore the system of 267:The exchange rate reflects transaction values for 2728:"Is the Aussie too expensive? iPad index says no" 2399:"Policy Innovations Digital Magazine (2006–2016)" 1587:For example, 1 basic Nespresso Capsule costs 0.5 45:. PPP is effectively the ratio of the price of a 2902:Purchasing power parity Converter (PPP Converter 2578:Paul Schreyer; Francette Koechlin (March 2002). 2435:"Abnormal Deviations in International Exchanges" 1359:(US) for the benchmark year (equal to 1), GDPdef 2776:"Here's How Much An iPad Costs In 46 Countries" 2478:The Princeton Encyclopedia of the World Economy 481: 2297:Taylor and Taylor, Alan and Mark (Fall 2004). 2233: 2231: 397:to compare purchasing power across countries. 2929: 8: 2881:List of Countries by Purchasing Power Parity 2844:Explanations from the U. of British Columbia 2145:Daneshkhu, Scheherazade (18 December 2007). 2863:World Bank International Comparison Project 2802:Recent Advances in Methods and Applications 2387:. Pearson Education, Inc. pp. 394–395. 2936: 2922: 2914: 2378: 2376: 2374: 2372: 2370: 2101: 2099: 2075:, Includes IMF ranked PPP of 186 countries 1617: 709: 648:The Present Situation of the Foreign Trade 548:), as against high income countries (like 2068:List of countries by GDP (PPP) per capita 1455:Learn how and when to remove this message 1314: 1308: 1307: 1294: 1288: 1287: 1284: 1269: 1263: 1262: 1245: 1239: 1238: 1225: 1219: 1218: 1215: 1200: 1194: 1193: 1189: 1174: 1168: 1167: 1164: 2853:(also provides daily updated PPP charts) 27:Measure of prices in different countries 2869:UBS's "Prices and Earnings" Report 2006 2095: 1515:Macs are not sold at every McDonald's ( 2148:"China, India economies '40% smaller'" 2079:Measures of national income and output 609:Differences in price level measurement 513:Tradable goods such as non-perishable 696:private final consumption expenditure 7: 2859:from Eurostat – Statistics Explained 2629:"Prices and Earnings (Edition 2012)" 2299:"The Purchasing Power Parity Debate" 1437:adding citations to reliable sources 593:conditions on both the demand side ( 450:with the Thai labourer who lives on 2073:List of IMF ranked countries by GDP 1519:), which limits its usage further. 92:, which says that, if there are no 2782:from the original on Oct 23, 2023. 2565:"Monthly comparative price levels" 2550:"Monthly comparative price levels" 25: 2726:Glenda Kwek (23 September 2013). 316:For example, if the value of the 166:World Development Indicators 2005 3459:neoclassical–Keynesian synthesis 2610:International Comparison Program 2433:Cassel, Gustav (December 1918). 2306:Journal of Economic Perspectives 2159:from the original on 2022-12-10. 2084:Relative purchasing power parity 2047: 1607:, the iPad index (elaborated by 1413: 1355:is the PPP exchange rate of the 681:List of countries by price level 588:Departures from free competition 441:International Comparison Program 215:Relative purchasing power parity 1424:needs additional citations for 575:Trade barriers and nontradables 2778:. Business Insider Australia. 2774:Liz Tay (September 23, 2013). 2247:St. Louis Federal Reserve Bank 2063:List of countries by GDP (PPP) 469:. In 2011, interviewed by the 354:purchasing power parity theory 320:falls by half compared to the 84:Purchasing power parity is an 1: 3395:Critique of political economy 2383:Krugman and Obstfeld (2009). 2267:Politi, Daniel (2011-11-24). 2106:Krugman and Obstfeld (2009). 2055:Business and economics portal 686:OECD comparative price levels 658:among participating nations. 638:The idea originated with the 258:relative levels of production 2667:. 2023-08-03. Archived from 2527:10.1080/09672567.2013.824999 2352:. 2011-05-29. Archived from 2269:"Argentina's Big Mac Attack" 404:; rather, the difference in 490:International Monetary Fund 4063: 3533:Real business-cycle theory 1537: 1402: 678: 502:Range and quality of goods 361:or, more strongly, in the 212: 3973: 2474:"purchasing power parity" 2472:Cheung, Yin-Wong (2009). 2110:. Pearson Education, Inc. 628:world's poorest countries 475:, a spokesperson for the 132:Balassa–Samuelson theorem 2895:Purchasing power parity 2318:10.1257/0895330042632744 1483:, are similar worldwide. 542:Balassa–Samuelson effect 369:Identifying manipulation 337:Exchange rate prediction 240:PPP exchange rates help 4032:International economics 3173:Industrial organization 3003:Computational economics 2761:Commonwealth Securities 2385:International Economics 2108:International Economics 1591:in Switzerland and 0.7 1148:Extrapolating PPP rates 603:product differentiation 113:purchasing power parity 31:Purchasing power parity 4027:Gross domestic product 3378:Modern monetary theory 3043:Experimental economics 3013:Pluralism in economics 2998:Mathematical economics 2552:. OECD. 14 April 2015. 2213:. OECD. Archived from 2008:United States (no tax) 1484: 1335: 499: 326:gross domestic product 66:gross domestic product 2634:. UBS. Archived from 1511:transportation, etc. 1479:, like this one from 1472: 1336: 250:market exchange rates 3252:Social choice theory 3008:Behavioral economics 2439:The Economic Journal 2031:Consumer price index 1433:improve this article 1163: 656:fixed exchange rates 562:factor of production 294:or interventions by 159:international dollar 51:market exchange rate 3336:American (National) 3036:Economic statistics 2690:"The Big Mac index" 2332:"Global gas prices" 640:School of Salamanca 618:Global poverty line 234:national production 151:Geary–Khamis dollar 2907:2023-07-12 at the 2897:Definition, Unesco 2849:2019-08-11 at the 2831:2017-10-20 at the 2562:as of 25 May 2024 2547:as of 14 Apr 2015 2175:2007-02-23 at the 1485: 1331: 467:standard of living 41:of the countries' 4009: 4008: 3540:New institutional 2891:The Big Mac Index 2764:23 September 2013 2641:on 26 August 2019 2567:. OECD. May 2024. 2487:978-0-691-12812-2 2023: 2022: 1680:Canada (Montréal) 1621:Country or region 1465: 1464: 1457: 1329: 1326: 1311: 1291: 1266: 1257: 1242: 1222: 1197: 1171: 1145: 1144: 721:Price level 2024 716:Price level 2015 190:developed nations 94:transaction costs 59:transaction costs 16:(Redirected from 4054: 4022:Purchasing power 3213:Natural resource 3048:Economic history 2986:Mechanism design 2938: 2931: 2924: 2915: 2826:Penn World Table 2813: 2812: 2811:on Aug 12, 2022. 2810: 2799: 2793:D., Rao (2001). 2790: 2784: 2783: 2771: 2765: 2755: 2749: 2742: 2736: 2735: 2723: 2717: 2716: 2714: 2713: 2704:. Archived from 2686: 2680: 2679: 2677: 2676: 2657: 2651: 2650: 2648: 2646: 2640: 2633: 2625: 2619: 2618: 2606: 2597: 2591: 2590: 2587:Statistics Brief 2584: 2575: 2569: 2568: 2560: 2554: 2553: 2545: 2539: 2538: 2521:(6): 1101–1121. 2510: 2499: 2498: 2496: 2494: 2469: 2463: 2462: 2445:(112): 413–415. 2430: 2424: 2419: 2413: 2412: 2410: 2409: 2395: 2389: 2388: 2380: 2365: 2364: 2362: 2361: 2346: 2340: 2339: 2338:. 23 March 2005. 2328: 2322: 2321: 2303: 2294: 2288: 2287: 2285: 2284: 2275:. Archived from 2264: 2258: 2257: 2255: 2253: 2244: 2238:Pakko, Michael. 2235: 2226: 2225: 2223: 2222: 2207: 2201: 2196: 2190: 2185: 2179: 2167: 2161: 2160: 2150: 2142: 2136: 2135: 2123: 2112: 2111: 2103: 2057: 2052: 2051: 1618: 1517:notably in India 1460: 1453: 1449: 1446: 1440: 1417: 1409: 1340: 1338: 1337: 1332: 1330: 1328: 1327: 1325: 1324: 1313: 1312: 1309: 1305: 1304: 1293: 1292: 1289: 1285: 1280: 1279: 1268: 1267: 1264: 1259: 1258: 1256: 1255: 1244: 1243: 1240: 1236: 1235: 1224: 1223: 1220: 1216: 1211: 1210: 1199: 1198: 1195: 1190: 1185: 1184: 1173: 1172: 1169: 710: 690:Each month, the 497: 395:baskets of goods 309:reflects such a 303:Penn World Table 246:quality of goods 117:purchasing power 90:law of one price 39:purchasing power 21: 4062: 4061: 4057: 4056: 4055: 4053: 4052: 4051: 4012: 4011: 4010: 4005: 4002:Business portal 3969: 3968: 3967: 3927: 3691:von Böhm-Bawerk 3579: 3578: 3569: 3341:Ancient thought 3319: 3318: 3312: 3303: 3302: 3301: 3052: 3017: 2981:Contract theory 2966:Decision theory 2947: 2942: 2909:Wayback Machine 2851:Wayback Machine 2833:Wayback Machine 2822: 2817: 2816: 2808: 2797: 2792: 2791: 2787: 2773: 2772: 2768: 2756: 2752: 2743: 2739: 2725: 2724: 2720: 2711: 2709: 2688: 2687: 2683: 2674: 2672: 2659: 2658: 2654: 2644: 2642: 2638: 2631: 2627: 2626: 2622: 2604: 2600:Paul McCarthy. 2599: 2598: 2594: 2582: 2577: 2576: 2572: 2563: 2561: 2557: 2548: 2546: 2542: 2512: 2511: 2502: 2492: 2490: 2488: 2471: 2470: 2466: 2451:10.2307/2223329 2432: 2431: 2427: 2420: 2416: 2407: 2405: 2397: 2396: 2392: 2382: 2381: 2368: 2359: 2357: 2348: 2347: 2343: 2330: 2329: 2325: 2301: 2296: 2295: 2291: 2282: 2280: 2266: 2265: 2261: 2251: 2249: 2242: 2237: 2236: 2229: 2220: 2218: 2209: 2208: 2204: 2197: 2193: 2186: 2182: 2177:Wayback Machine 2168: 2164: 2153:Financial Times 2144: 2143: 2139: 2125: 2124: 2115: 2105: 2104: 2097: 2092: 2053: 2046: 2043: 2028: 2000:US (California) 1688:Canada (no tax) 1627: 1625: 1601: 1570: 1568:Nespresso Index 1558:market research 1544:Similar to the 1542: 1536: 1487: 1486: 1461: 1450: 1444: 1441: 1430: 1418: 1407: 1401: 1393: 1381: 1374: 1370: 1366: 1362: 1354: 1350: 1346: 1306: 1286: 1261: 1260: 1237: 1217: 1192: 1191: 1166: 1161: 1160: 1150: 722: 717: 688: 683: 677: 672: 636: 620: 611: 590: 577: 504: 498: 494:Financial Times 488: 472:Financial Times 391: 371: 350:economic theory 339: 311:systematic bias 230: 225: 217: 211: 198: 106:basket of goods 82: 74:basket of goods 28: 23: 22: 15: 12: 11: 5: 4060: 4058: 4050: 4049: 4044: 4039: 4034: 4029: 4024: 4014: 4013: 4007: 4006: 4004: 3999: 3994: 3989: 3984: 3979: 3974: 3971: 3970: 3966: 3965: 3960: 3950: 3945: 3939: 3938: 3937: 3935: 3929: 3928: 3926: 3925: 3918: 3913: 3908: 3903: 3898: 3893: 3888: 3883: 3878: 3873: 3868: 3863: 3858: 3853: 3848: 3843: 3838: 3833: 3828: 3823: 3818: 3813: 3808: 3803: 3798: 3793: 3788: 3783: 3778: 3773: 3768: 3763: 3758: 3753: 3748: 3743: 3738: 3733: 3728: 3723: 3718: 3713: 3708: 3703: 3698: 3693: 3688: 3683: 3678: 3673: 3668: 3663: 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2961:Microeconomics 2957: 2955: 2949: 2948: 2943: 2941: 2940: 2933: 2926: 2918: 2912: 2911: 2899: 2893: 2888: 2878: 2872: 2866: 2860: 2854: 2841: 2840:from OECD data 2835: 2821: 2820:External links 2818: 2815: 2814: 2785: 2766: 2750: 2737: 2718: 2696:. 2019-01-10. 2681: 2652: 2620: 2592: 2570: 2555: 2540: 2500: 2486: 2464: 2425: 2414: 2390: 2366: 2341: 2323: 2312:(4): 135–158. 2289: 2259: 2240:"Burgernomics" 2227: 2202: 2191: 2180: 2162: 2137: 2113: 2094: 2093: 2091: 2088: 2087: 2086: 2081: 2076: 2070: 2065: 2059: 2058: 2042: 2039: 2027: 2024: 2021: 2020: 2017: 2013: 2012: 2009: 2005: 2004: 2001: 1997: 1996: 1993: 1992:United Kingdom 1989: 1988: 1985: 1981: 1980: 1977: 1973: 1972: 1969: 1965: 1964: 1961: 1957: 1956: 1953: 1949: 1948: 1945: 1941: 1940: 1937: 1933: 1932: 1929: 1925: 1924: 1921: 1917: 1916: 1913: 1909: 1908: 1905: 1901: 1900: 1897: 1893: 1892: 1889: 1885: 1884: 1881: 1877: 1876: 1873: 1869: 1868: 1865: 1861: 1860: 1857: 1853: 1852: 1849: 1845: 1844: 1841: 1837: 1836: 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per capita 139:exchange rates 98:trade barriers 81: 78: 70:cost of living 26: 24: 14: 13: 10: 9: 6: 4: 3: 2: 4059: 4048: 4045: 4043: 4040: 4038: 4035: 4033: 4030: 4028: 4025: 4023: 4020: 4019: 4017: 4003: 4000: 3998: 3995: 3993: 3990: 3988: 3985: 3983: 3980: 3978: 3975: 3972: 3964: 3961: 3958: 3954: 3951: 3949: 3946: 3944: 3941: 3940: 3936: 3934: 3930: 3924: 3923: 3919: 3917: 3914: 3912: 3909: 3907: 3904: 3902: 3899: 3897: 3894: 3892: 3889: 3887: 3884: 3882: 3879: 3877: 3874: 3872: 3869: 3867: 3864: 3862: 3859: 3857: 3854: 3852: 3849: 3847: 3844: 3842: 3839: 3837: 3834: 3832: 3829: 3827: 3824: 3822: 3819: 3817: 3814: 3812: 3809: 3807: 3804: 3802: 3799: 3797: 3794: 3792: 3789: 3787: 3784: 3782: 3779: 3777: 3774: 3772: 3769: 3767: 3764: 3762: 3759: 3757: 3754: 3752: 3749: 3747: 3744: 3742: 3739: 3737: 3734: 3732: 3729: 3727: 3724: 3722: 3719: 3717: 3714: 3712: 3709: 3707: 3704: 3702: 3699: 3697: 3694: 3692: 3689: 3687: 3684: 3682: 3679: 3677: 3674: 3672: 3669: 3667: 3664: 3662: 3659: 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3255: 3253: 3249: 3248:Public choice 3246: 3244: 3241: 3239: 3236: 3234: 3231: 3229: 3226: 3224: 3223:Participation 3221: 3219: 3216: 3214: 3211: 3209: 3206: 3204: 3201: 3199: 3196: 3194: 3191: 3189: 3186: 3184: 3183:Institutional 3181: 3179: 3176: 3174: 3171: 3169: 3166: 3164: 3161: 3159: 3156: 3154: 3151: 3149: 3146: 3144: 3141: 3139: 3136: 3134: 3133:Expeditionary 3131: 3129: 3126: 3124: 3123:Environmental 3121: 3119: 3116: 3114: 3111: 3109: 3106: 3104: 3101: 3099: 3096: 3094: 3091: 3089: 3086: 3084: 3081: 3079: 3076: 3074: 3071: 3069: 3066: 3065: 3061: 3059: 3055: 3049: 3046: 3044: 3041: 3037: 3034: 3033: 3032: 3029: 3028: 3026: 3024: 3020: 3014: 3011: 3009: 3006: 3004: 3001: 2999: 2996: 2994: 2991: 2987: 2984: 2982: 2979: 2977: 2974: 2972: 2969: 2967: 2964: 2963: 2962: 2959: 2958: 2956: 2954: 2950: 2946: 2939: 2934: 2932: 2927: 2925: 2920: 2919: 2916: 2910: 2906: 2903: 2900: 2898: 2894: 2892: 2889: 2886: 2882: 2879: 2876: 2873: 2870: 2867: 2864: 2861: 2858: 2855: 2852: 2848: 2845: 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491: 485: 480: 478: 474: 473: 468: 463: 459: 455: 453: 449: 444: 442: 437: 435: 430: 426: 423: 422:price indices 418: 414: 412: 407: 403: 398: 396: 388: 386: 384: 380: 379:Big Mac Index 377:In 2011, the 375: 368: 366: 364: 360: 355: 351: 348: 343: 336: 334: 330: 327: 323: 319: 314: 312: 308: 304: 299: 297: 296:central banks 293: 289: 285: 281: 277: 273: 270: 265: 261: 259: 255: 251: 247: 243: 238: 235: 227: 222: 220: 216: 208: 206: 203: 195: 193: 191: 187: 183: 179: 175: 171: 167: 164: 160: 156: 152: 147: 145: 140: 135: 133: 129: 124: 120: 118: 114: 109: 107: 102: 99: 95: 91: 87: 79: 77: 75: 71: 67: 62: 60: 56: 52: 48: 47:market basket 44: 40: 36: 32: 19: 4037:Inequalities 3997:Publications 3953:Publications 3920: 3516:Neoclassical 3506:Mercantilism 3415:Evolutionary 3277:Sociological 3250: / 3148:Geographical 3128:Evolutionary 3103:Digitization 3068:Agricultural 3031:Econometrics 2971:Price theory 2883:since 1990 ( 2806:the original 2801: 2788: 2769: 2759: 2753: 2745: 2740: 2731: 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OECD. 2408:2019-09-27 2360:2023-03-22 2283:2019-10-23 2221:2019-08-26 2090:References 1808:Luxembourg 1599:iPad Index 1499:McDonald's 1477:hamburgers 981:Luxembourg 970:Lithuania 679:See also: 228:Conversion 196:Variations 43:currencies 3866:Greenspan 3831:Samuelson 3811:Galbraith 3781:Tinbergen 3721:von Mises 3716:Heckscher 3676:Edgeworth 3555:Stockholm 3550:Socialist 3450:Keynesian 3430:Happiness 3390:Classical 3351:Mutualism 3346:Anarchist 3331:Heterodox 3228:Personnel 3188:Knowledge 3153:Happiness 3143:Financial 3113:Education 3088:Democracy 3023:Empirical 2945:Economics 2702:0013-0613 2645:26 August 2535:154383662 2493:2 October 2336:CNN/Money 2252:24 August 2019:$ 554.08 2011:$ 499.00 2003:$ 546.91 1995:$ 638.81 1987:$ 544.32 1979:$ 656.96 1971:$ 530.72 1963:$ 538.34 1955:$ 617.58 1947:$ 706.87 1939:$ 674.96 1931:$ 576.20 1923:$ 559.38 1915:$ 674.96 1907:$ 674.96 1899:$ 525.98 1896:Singapore 1891:$ 596.08 1883:$ 688.49 1875:$ 704.51 1867:$ 550.00 1859:$ 556.42 1851:$ 655.92 1843:$ 610.45 1835:$ 683.08 1827:$ 591.62 1819:$ 473.77 1811:$ 641.50 1803:$ 501.56 1795:$ 674.96 1787:$ 630.73 1779:$ 512.61 1771:$ 679.64 1763:$ 501.52 1760:Hong Kong 1755:$ 715.54 1747:$ 618.34 1739:$ 688.49 1731:$ 695.25 1723:$ 725.32 1715:$ 676.69 1707:$ 602.52 1699:$ 602.13 1691:$ 467.36 1683:$ 557.18 1675:$ 525.52 1667:$ 791.40 1659:$ 618.34 1651:$ 674.96 1643:$ 506.66 1640:Australia 1632:Argentina 1603:Like the 1578:Nespresso 1572:Like the 1550:KFC Index 1540:KFC Index 1534:KFC Index 1282:⋅ 1213:⋅ 797:*No Data 786:*No Data 783:Colombia 728:Australia 436:effects. 363:short run 322:US dollar 278:, to buy 186:Denmark's 180:is about 155:GK dollar 111:The name 4047:Currency 3977:Category 3957:journals 3943:Glossary 3896:Stiglitz 3861:Rothbard 3841:Buchanan 3826:Friedman 3816:Koopmans 3806:Leontief 3786:Robinson 3671:Marshall 3521:Lausanne 3425:Georgism 3420:Feminist 3368:Buddhist 3358:Austrian 3257:Regional 3233:Planning 3208:Monetary 3138:Feminist 3083:Cultural 3078:Business 2905:Archived 2847:Archived 2829:Archived 2780:Archived 2273:Latitude 2173:Archived 2157:Archived 2041:See also 1968:Thailand 1912:Slovenia 1904:Slovakia 1880:Portugal 1864:Pakistan 1816:Malaysia 1069:Slovenia 1058:Slovakia 1047:Portugal 973:No Data 962:No Data 713:Country 670:Examples 546:Ethiopia 538:tradable 519:diamonds 487:— 359:long run 254:real GDP 128:volatile 86:economic 3992:Outline 3963:Schools 3955: ( 3916:Piketty 3911:Krugman 3776:Kuznets 3766:Kalecki 3741:Polanyi 3631:Cournot 3626:Bastiat 3611:Ricardo 3601:Malthus 3591:Quesnay 3494:Marxian 3385:Chicago 3315:history 3310:Schools 3297:Welfare 3267:Service 3058:Applied 2732:The Age 2459:2223329 2016:Vietnam 1784:Ireland 1768:Hungary 1744:Germany 1728:Finland 1720:Denmark 1656:Belgium 1648:Austria 1613:Big Mac 1609:CommSec 1495:Big Mac 1474:Big Mac 1265:PPPrate 1196:PPPrate 1170:PPPrate 959:Latvia 904:Ireland 893:Iceland 882:Hungary 860:Germany 838:Finland 827:Estonia 816:Denmark 750:Belgium 739:Austria 634:History 292:hedging 272:between 242:costing 161:). 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