Purchasing Power ParityPPP

PPP is based on the law of one price: in efficient markets, identical goods should sell for the same price everywhere once converted into a common currency.

• Absolute PPP: the exchange rate equals the ratio of price levels in the two countries. Exchange rate (home per foreign) = Domestic price level / Foreign price level.
• Relative PPP: the change in the exchange rate over time equals the difference in inflation rates. A country with higher inflation should see its currency depreciate by roughly the inflation differential.

In practice, PPP does not hold exactly in the short run because of transport costs, tariffs, non-traded goods such as services and housing, and capital flows. It is more useful as a long-run guide.

PPP is widely used to compare living standards and output across countries. The World Bank and IMF publish GDP and per capita income on a PPP basis, which gives a higher figure than market exchange rates for countries like Nepal where non-traded goods are cheap. The Economist's Big Mac Index is a popular illustration of PPP.

PPP एक मूल्यको नियम (law of one price) मा आधारित छ: कुशल बजारमा साझा मुद्रामा बदल्दा एउटै वस्तुको मूल्य जहाँ पनि बराबर हुनुपर्छ।

• निरपेक्ष PPP: विनिमय दर = स्वदेशी मूल्यस्तर / विदेशी मूल्यस्तर।
• सापेक्ष PPP: विनिमय दरमा परिवर्तन = मुद्रास्फीति दरको अन्तर; बढी मुद्रास्फीति भएको देशको मुद्राको मूल्य घट्छ।

ढुवानी लागत, भन्सार, व्यापार नहुने वस्तु र पुँजी प्रवाहका कारण छोटो अवधिमा PPP ठ्याक्कै लागू हुँदैन; दीर्घकालीन मार्गदर्शकका रूपमा उपयोगी हुन्छ। विश्व बैंक र IMF ले PPP आधारमा GDP र प्रतिव्यक्ति आय प्रकाशित गर्छन्; नेपाल जस्ता देशको PPP आधारित आय बजार दरको भन्दा बढी देखिन्छ। बिग म्याक इन्डेक्स यसको लोकप्रिय उदाहरण हो।