Talk:Purchasing power parity

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Above message substituted from on 14:37, 7 January 2023 (UTC)

"Major rewrite"

 * I've just done a major rewrite.rajkumar The new version clarifies what the PPP method is, what it's used for and why, and what issues it has.  I also removed all references to a PPP "theory."  PPP is a method, not a theory.  I know of no theory saying that "in equilibrium, the exchange rate that will prevail between two countries will be that which equalizes the prices of traded goods in each country."   The whole point of using PPP is that using real exchange rates, goods won't cost the same amount in different countries. Isomorphic 01:46, 10 Jun 2004 (UTC)
 * Because of so called arbitrage some prices strive towards a common price. For example prices for precious metals like gold doesn't range widely across borders. Gold cost $420 US dolllars per troy ounce in most parts of the world. If it sold for $200 bucks per ounce in Canada or even China it would sell out pretty quick. While things like a Big Mac is not as easily arbitraged across wide distances.

Currency Pegs
While I realize that this may be overly technical for most of the audience, one of the critical factors in understanding differences, especially for china, is the currency peg placed between the chinese and american currencies.

If the currencies were allowed to float (if free markets were allowed to correct imbalances), the chinese currency would be stronger. By extention, the real GDP of China would be considerably higher then the $1290.

This reality not only helps explain the benefit of PPP in inefficient currency markets, but also would be important to help assuage confusions like the above post.


 * No, a GDP does not stick to your currency, as life has shown. Chinese currency hike will not increase GDP in US dollars. That did not happen in Switzerland, that did not happen in Japan, that did not happen in Zambia, that did not happen in Somalia. Why should it happen in China? --18:49, 4 May 2023 (UTC)

Price comparisons just horizontal, or vertical too?
Are the comparisons in prices of goods done only horizontally, i.e. comparing the price of a McDonalds in UK and the price of a McDonalds in the US, or do they compare the prices vertically too, like for example the price of a McDonalds hamburger compared to the price of a burger made from Kobe beef?

GDP
concept 36.252.193.184 (talk) 19:53, 6 May 2022 (UTC)


 * @ 2403:6200:8840:823:7963:915F:C7CC:B71B (talk) 18:50, 15 October 2023 (UTC)

Ppp
I wamt to check 2405:204:3128:6034:E18F:9401:6DAE:ECE9 (talk) 10:41, 8 October 2022 (UTC)

Exchange rate prediction
The first paragraph under the heading === Exchange rate prediction[edit] === seems self-contradictory. SamIAmNot (talk) 13:30, 5 April 2023 (UTC)

IMF
What goods and in what proportion does the IMF use to calculate price levels, and where do they publish these prices? --95.24.60.6 (talk) 18:43, 4 May 2023 (UTC)

Average?
Are average prices in a country usually counted or lowest ones (or highest?)?. Because, like, India is a country with huge population, with different regions. Are average prices for India taken, or the cheapest region or what? --95.24.65.62 (talk) 16:28, 18 May 2023 (UTC)

What's ICP?
What's ICP?

I see it used in this article and elsewhere, but I don't know what it means. Thanks, DavidMCEddy (talk) 12:47, 14 April 2024 (UTC)


 * I found it: International Comparison Program. I then found it spelled out in this article and added "(ICP)" immediately after, so others who don't know can more easily find it. I also added it to the "ICP" disambiguation page. DavidMCEddy (talk) 20:13, 14 April 2024 (UTC)