International dollars are used to compare incomes and purchasing power across countries and over time. Here, we explain how they’re calculated and why they’re used.

Much of the economic data we use to understand the world, such as the incomes people receive or the goods and services firms produce and people buy, is recorded in the local currencies of each country. For example, in 2023, Gross Domestic Product (GDP) per capita — a common measure of the average income of people in a year — was around 205,000 rupees in India, 89,000 yuan in China, and 83,000 dollars in the United States.

These numbers in local currencies can provide useful context within each country. But on their own, they tell us nothing about how these figures compare. How rich or poor is someone with 205,000 rupees in India compared to 89,000 yuan in China or 83,000 dollars in the United States?

International dollars are a hypothetical currency that helps us answer such questions by equating different currencies with what they can buy. They adjust for the fact that the cost of living is much higher in some countries than in others, allowing us to compare data denominated in different currencies in terms of their local “purchasing power”.

In this article, we explain what international dollars are, how they are calculated, and the crucial perspective they offer for understanding living standards worldwide.

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