Economics
A method of comparing economic productivity and living standards between countries by adjusting for price levels.
The IMF defines PPP as “the rate at which the currency of one country would have to be converted into that of another country to buy the same amount of goods and services in each country”. It is a constructed comparison rate, not a market rate: it answers what a currency buys at home, which is why PPP-converted figures for output or income differ, often sharply, from figures converted at the exchange rate of the day.
The IMF’s own explainer. The methods behind PPP estimates, and their revisions, belong to the International Comparison Program and are not described here.
From the AJG lexicon archive (July 2026).
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