Definition: Purchasing power standard

Category: Purchasing power parities

"The artificial common reference currency unit used in the European Union to express the volume of economic aggregates for the purpose of spatial comparisons in such a way that price level differences between Member States are eliminated." Article 3(b) PPP (Purchasing power parity) Regulation.

The artificial currency unit in which the PPPs and real expenditures for the European Union are expressed – namely, euros at average EU price levels. Euros at average EU price levels are euros that have the same purchasing power over the whole of the European Union. Their purchasing power is a weighted average of the purchasing power of the national currencies of EU Member States. As such they reflect the average price level in the European Union or, more precisely, the weighted average of the price levels of EU Member States. PPS are defined by equating the total real expenditure of the European Union on a specific basic heading, aggregation level or analytical category to the total nominal expenditure of the European Union on the same basic heading, aggregation level or analytical category. http://ec.europa.eu/eurostat/product?code=KS-RA-12-023&mode=view