The Purchasing Power Parity Debate

摘要

Purchasing power parity (PPP) is a disarmingly simple theory that holds that the nominal exchange rate between two currencies should be equal to the ratio of aggregate price levels between the two countries, so that a unit of currency of one country will have the same purchasing power in a foreign country The PPP theory has a long history in economics, dating back several centuries, but the specific terminology of purchasing power parity was introduced in the years after World War I during the international policy debate concerning the appropriate level for nominal exchange rates among the major industrialized countries after the large-scale inflations during and after the war (Cassel, 1918), Since then, the idea of PPP has become embedded in how many international economists think about the world, For example, Dornbusch and Krugman (1976) noted: "Under the skin of any international economist lies a deep-seated belief in some variant of the PPP theory of the exchange rate."