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The term Kaufkraftparität is used:

  • In the purchasing power parity theory: The Kaufkraftparität is present (by definition), if in two States of being and servicesa Warenkorbes over equal high money to be acquired can. A currency is converted into the other one with consideration of the usual rate of exchange.
  • As factor: The Kaufkraftparität (PPP, purchasing power parity) is a fictitious (change) course between two currencies, that itself from the purchasing power of the twoCurrencies in its respective countries of origin computes (using a representative being and service basket)
  • The purchasing power standard (KKS; engl: purchasing powerstandard PPS) is used in similar kind as PPP-$
    design fundamentals at present: To purchasing power of theoretical EU-25-Mittelwerts-Währung in the EU-25

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purchasing power parity theory you on the principle of the law of the uniform price. Therefore a property must sell itself everywhere in the world at the same price. Otherwise there would be arbitrage possibilities. According to this theory a monetary unit in all countries must have the same purchasing power, it must everywhere the same material value possess.

It originally originates from thatmonetary external trade theory. It is computed thereby how many units of the respective currency are necessary, in order to buy the same representative being and service basket, which one could receive for 1 US Dollar in the USA. At short notice the rate of exchange can deviate from the Kaufkraftparität, on a long-term basis should itbut vary around this value.

As a Wegbereiter to this interpretation of the purchasing power parity theory Gustav Cassel is considered, if equivalent beginnings to their itself already in 17. Century find. On the basis of this interpretation and the interest parity theory Ruediger thorn shrubs developed the monetary rate of exchange theory.

Kaufkraftparität (monetary theory) and general one Equilibrium theory (material-economical theory):

The Kaufkraftparität can be deduced from the standard model of the general equilibrium theory, with which the theorem of the komparativen cost advantages is usually represented. This two country two goods two Faktorenmodell is only supplemented around the quantity equation and made possible so the derivation of the interest on loan. With this extended model leaves itselfit shows that the theorem of the komparativen advantages and the Kaufkraftparität are the two sides medal and/or. the monetary balance of payments theory the theorem of the komparativen advantages with firm rates of exchange reflects.


Quantity equation:

    M = Px*X + Py*Y    

(M = money supply, Px = price of the property X,X = property X, Py = price of the property Y, Y = property Y; The peripheral speed of the money was standardized on one!)

Condition for an exchange optimum (border rate of the substitution corresponds to the reciprocal goods price relationship):

    - dY/dX = Px/Py

the condition for an exchange optimum into the quantity equationbegun results in for

    Px:   Px = M/(x (dX/dY) Y, and for  
    Py:   Py = M/(Y (dY/dX) X)

If one introduces in this way interest on loan to the two-land two-goods model and neglects international capital traffic, then Kaufkraftparität always prevails! It applies thus:

    PxA = E*PxB

(PxA = price of the propertyX in the country A, E = rate of exchange, PyB = price of the property X in the country B)

literature: Gerhold, R., the Kaufkraftparität as connecting link between the material and monetary external trade theory, Metropolis, Marburg 1999.

purchasing power parities as units

for international income comparisons determine international organizations (e.g. World Bank, EURO ACT) such purchasing power parities empirically, in order to eliminate distortions by rate of exchange fluctuations.

Since many developing countries (according to the purchasing power parity theory) exhibit underestimated currencies, their Pro-Kopf-Einkommen presents itself converted into (USD) purchasing power parities mostly more highly than with official rates of exchange.

A popular example of purchasing power parities on an alternativeBasis is of the magazine the The Economist regularly publishes so-called bend Mac index. It is determined how much bend Mac in a McDonalds - restaurant in the different countries in the world costs. These prices are made the basis of a currency conversion.

The IPod index is similar. Herethe selling price of the IPods in different countries, produced by the company Apple, is compared.

A main difference between both indices lies in the fact that IPods represent a property tradable over national borders, while with bend Macs no international trade one operates.

example table

of gross domestic products of selected statesof 1997 (after Fischer world yearbook 2000):

Country gros domestic product/head (in USD) gros domestic product/head (in PPP-$) relation
Switzerland 43060 26580 0.62
Norway the 36100 24260 0.67
USA 29080 29080 1
Germany 28280 21170 0.75
Great Britain 20870 20710 0.99
Portugal 11010 14180 1.29
Saudi Arabia 7150 10540 1.47
Brazil 4790 6350 1.32
Poland 3590 6510 1.81
China 860 3070 3.57
India 370 1660 4.49
Nigeria 280 ,860 3.07
Sierra Leone 160 ,410 2,56

1997 had to be paid for a US Dollar about 1.43 Swiss Franconias.

1,43 divided by 0,62 result in 2.30

the Kaufkraftparität (PPP) between dollar andFranconia amounted to therefore 2.30

overview of nearly all countries in the world (conditions: 2005)

see also

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