Purchasing power parity (PPP) is a popular metric used by macroeconomic analysts that compares different countries' currencies through a "basket of goods" approach.
PPP allows economists to compare economic productivity and standards of living between countries.
Some countries adjust their gross domestic product (GDP) figures to reflect PPP.
Some feel that PPP does not reflect reality due to differences in local costs, taxes, tariffs, and competition.
To make a meaningful comparison of prices across countries, a wide range of goods and services must be considered. However, the one-to-one comparison is difficult to achieve due to the sheer amount of data that must be collected and the complexity of the comparisons that must be drawn.
Calculating Purchasing Power Parity
How PPP Is Used