Purchasing Power Parity (PPP) Calculator
Calculate the PPP-implied exchange rate, compare real price levels across countries, and convert nominal GDP or wages to PPP-adjusted values.
Results
What is it?
Purchasing Power Parity states that, in the long run, exchange rates should equalise the price of an identical basket of goods across countries. PPP Exchange Rate = Price (Domestic) / Price (Foreign). If the PPP rate < Market Rate, the domestic currency is undervalued (cheap). The Economist's Big Mac Index is a famous informal PPP measure.
How to use
Enter the price of an identical item or basket in both currencies (your domestic currency and the foreign currency). Enter the actual market exchange rate. The calculator tells you the implied PPP rate and how over- or under-valued your currency is.
Example scenario
A Big Mac costs ฿120 in Thailand and $5.50 in the USA. Market rate: ฿33.50/$. PPP rate = 120/5.50 = ฿21.8/$. Market rate 33.50 vs PPP 21.8 → THB is undervalued by 35% relative to PPP. Thai goods are "cheaper" than the exchange rate suggests.
Pro tip
PPP is a long-run equilibrium concept — real exchange rates can deviate significantly for years. It is most useful for comparing real wages, GDP per capita, and cost of living across countries. GDP at PPP (from World Bank / IMF) removes exchange rate distortions for fair international comparison.