Purchasing power parities (PPPs) are indicators of price level differences across countries.
They indicate how many currency units a particular quantity of goods and services costs in different countries.
PPPs can be used as currency conversion rates to convert expenditures expressed in national currencies into an artificial common currency (the Purchasing Power Standard, PPS), thus eliminating the effect of price level differences across countries.
- Convert national accounts aggregates into comparable volume aggregates. In particular, PPPs can be used to compare the Gross Domestic Product (GDP) of different countries without the figures being distorted by differing price levels in those countries.
- Analyse relative price levels across countries. For this purpose, the PPPs are divided by the current nominal exchange rate to obtain a price level index (PLI) which expresses the price level of a given country relative to others.
Data are available for 37 countries: the 28 EU Member States, three member states of the European Free Trade Association (EFTA), five candidate countries and one potential candidate country.
The production of PPPs is a multilateral exercise involving the National Statistical Institutes of the participating countries, Eurostat and the Organisation for Economic Co-operation and Development (OECD), and is governed by the PPP Regulation.