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Purchasing power risk |
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Purchasing power riskRelated: Inflation riskPurchasing power risk Similar MatchesPurchasing power parity theoryPurchasing power parity theoryA theory of the exchange rate that the rate will adjust to achieve purchasing power parity, in either its absolute or its relative form. Purchasing powerPurchasing powerThe amount of goods and services which can be purchased by a given unit of currency after taking into account the effect of inflation. Purchasing power can be assessed by tracking an index of consumer prices and comparing different periods, for example the early 1990s and the current time. Inflation will result in reduced purchasing power over a period of time. Purchasing powerPurchasing powerThe amount of goods that money will buy, usually measured (inversely) by the CPI. Purchasing power parity exchange ratePurchasing power parity exchange rateAn exchange rate calculated to yield absolute purchasing power parity. Useful for making comparisons of real values (wages, GDP) across countries with different currencies. Since the purchasing power parity theory is rarely correct, this contrasts with the nominal exchange rate. Purchasing power parityPurchasing power parityThe notion that the ratio between domestic and foreign price levels should equal the equilibrium exchange rate between domestic and foreign currencies. Further SuggestionsPurchasing power parityPurchasing power Purchasing power of the dollar Absolute form of purchasing power parity Relative form of purchasing power parity |
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