reply on: Please explain PPP and the numbers in the chart \ stacker news ~charts_and

pull down to refresh

5321 sats \ 13 replies \ @0xbitcoiner 18 Jul \ on: Please explain PPP and the numbers in the chart charts_and_numbers

While I may not be the expert on this topic, we can refer to the OECD's definition of PPP for further clarification.

Purchasing power parities (PPPs) are the rates of currency conversion that try to equalise the purchasing power of different currencies, by eliminating the differences in price levels between countries. The basket of goods and services priced is a sample of all those that are part of final expenditures: final consumption of households and government, fixed capital formation, and net exports. This indicator is measured in terms of national currency per US dollar.

https://www.oecd.org/en/data/indicators/purchasing-power-parities-ppp.html

You can find a more in-depth explanation here: https://www.oecd.org/en/data/insights/data-explainers/2024/06/purchasing-power-parities---frequently-asked-questions-faqs.html

PPP detailed results, Purchasing power parities https://data-explorer.oecd.org/vis?lc=en&df[ds]=dsDisseminateFinalDMZ&df[id]=DSD_PPP%40DF_PPP_PPP&df[ag]=OECD.SDD.TPS&df[vs]=latest&dq=.A....&lom=LASTNPERIODS&lo=4&to[TIME_PERIOD]=false

Annual Purchasing Power Parities and exchange rates https://data-explorer.oecd.org/vis?lc=en&df[ds]=dsDisseminateFinalDMZ&df[id]=DSD_NAMAIN10%40DF_TABLE4&df[ag]=OECD.SDD.NAD&df[vs]=latest&dq=A.AUS%2BAUT%2BBEL%2BCAN%2BCHL%2BCOL%2BCRI%2BCZE%2BDNK%2BEST%2BFIN%2BFRA%2BDEU%2BGRC%2BHUN%2BISL%2BIRL%2BISR%2BITA%2BJPN%2BKOR%2BLVA%2BLTU%2BLUX%2BMEX%2BNLD%2BNZL%2BNOR%2BPOL%2BPRT%2BSVK%2BSVN%2BESP%2BSWE%2BCHE%2BTUR%2BGBR%2BUSA...PPP_B1GQ.......&lom=LASTNPERIODS&lo=10&to[TIME_PERIOD]=false

837 sats \ 10 replies \ @Undisciplined 18 Jul

I can add a little detail here.

PPP specifically takes into account price differences of non-tradable (internationally) goods and services.

We expect exchange rates to account for the price differences in things like apples or oil, because they trade internationally and should have the same real price everywhere. However, haircuts and restaurant meals cannot be traded, which means their real prices vary by location.

55 sats \ 5 replies \ @CheezeGrater OP 19 Jul

Realistically though apples in one city in country A won't cost the same as apples in another city in country B, especially if you're comparing imported apples in one location to local apples in another.

I've been interested for a while in comparing the real cost of living between locations, kind of like what the PPP tries to do. A collective project to capture this data per city would be pretty cool.

88 sats \ 4 replies \ @Undisciplined 19 Jul

If you dive into the literature on this, it gets really complicated, really fast. That's one reason why simple crude measures are used. PPP is pretty unambiguously an improvement from just doing exchange rate conversions.

Once you try to go deeper than that, there's a ton of stuff you have to take account of and some of it is unknowable (like people's actual preference differences internationally).

If you make any headway, I'll be super interested in hearing about your methodology.

55 sats \ 2 replies \ @CheezeGrater OP 19 Jul

I'm thinking about building a basket of goods that roughly applies to me and then doing some research on local prices around the world.

I get that doing this research on the PPP scale is a very large task but what I'm interested in seems doable.

21 sats \ 0 replies \ @Bell_curve 19 Jul

CPI basket of goods lol

23 sats \ 0 replies \ @Undisciplined 19 Jul

I like that. This is a much more tractable question at the individual level than the aggregate.

I've thought of doing something similar with all the different US tax rates. I want to have a tool where you can input your personal details and get a granular map of what your tax burden would be in every single place in America.

34 sats \ 0 replies \ @CheezeGrater OP 19 Jul

Combining the local price data with local salary data would give you a usable cost of living comparison.

42 sats \ 3 replies \ @TNStacker 18 Jul

When you say apples and oil should. have the same price everywhere, this is ex-tranaportation expenses, yes?

34 sats \ 2 replies \ @Undisciplined 18 Jul

You'd think so, but I don't think PPP accounts for that. It's basically just an upgrade over purely using exchange rates to make cost of living comparisons.

42 sats \ 1 reply \ @Bell_curve 18 Jul

PPP is not a bad way to adjust for comparisons.

There has to be a better way

34 sats \ 0 replies \ @Undisciplined 18 Jul

I agree. PPP is not perfect, but it makes crude comparisons better.

There are conceptually better ways, but they tend to require data that no one keeps in many of these places.