单词 | purchasing power parity |
释义 | purchasing power parity = (PPP) The theory that exchange rate between currencies are determined in the long run by the amount of goods and services that each can buy. In the absence of transport costs and tariffs, if the price of tradable goods were lower in one country than another, traders could gain by buying goods in the cheaper country and selling in the dearer: relative price levels thus determine the equilibrium exchange rate. Not all goods are tradable, and even for tradables transport costs and tariffs mean that prices need not be equal, but the same forces of arbitrage limit their differences, and thus limit the deviations of exchange rates from PPP. An alternative form of PPP says that changes in the equilibrium exchange rate are determined by changes in relative price levels. |
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