Relative Purchase Power Parity


Relative Purchase Power Parity
An expansion of the purchase power parity theory, which suggests that prices in countries vary for the same product but that they differ by the same proportional rate over time. The reasons suggested for this price difference include taxes, shipping costs and differences in product quality.

The relative purchase power parity condition suggests that countries with higher rates of inflation will have a devalued currency.


Investment dictionary. . 2012.

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