One thing I've never understood about PPP, is it an attempt to measure -what it is like living in a poor country- or is the idea more modest as the above paragraph suggests trying to demonstrate what the market equivalent amount of currency buys in a given country? For example the PPP GDP or GNP per capita of a country is $US 500. Does this mean that living in that country on that given amount of money is like living in the USA on the same amount of money?
It is more muddled than that. PPP creates its own international currency: the "international dollar" which makes things not very comparable (but you only see that if you look hard for the footnotes and sometimes it is left out). PPP does use the US as the "normalizer" - i.e. the U.S. PPP basket = 100 so, if one believed in the U.S. basket as a true reflection of U.S. life (not an accurate assumption) then $500 in PPP would be like living on that in the U.S.
Paul
Paul
