Definition: Paasche type PPP

Purchasing power parities

A PPP (Purchasing power parity) for a basic heading or an aggregate between two countries, country B and country A, where the reference country is country A and the weights are those of country B. At the basic heading level, the PPP is defined as a quasi-weighted geometric average of the price relatives between country B and country A for the products representative of country B. At an aggregate level, the PPP is defined as the weighted harmonic average of the PPPs between country B and country A for the basic headings covered by the aggregate with the expenditure shares of country B being used as weights.
Source:
Eurostat, Organization for Economic Cooperation and Development (OECD), "Eurostat-OECD Methodological Manual on Purchasing Power Parities", Publications Office of the European Union, Luxembourg, 2012
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