Purchasing power parity theory

The Big Mac Index | The Economist

Our interactive currency comparison tool January 12, 2021 TTHE BIG MAC index was invented by The Economist in 1986 as a light guide to whether currencies are at their “correct” level. It is based on the theory of purchasing power parity (PPP), the notion that in the long run exchange …

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Definition of the Balassa-Samuelson effect

What is the Balassa-Samuelson effect? The Balassa-Samuelson effect indicates that the differences in productivity between the production of tradable goods in different countries 1) explain the large differences observed in wages and in the price of services and between purchasing power parity and exchange rate, and 2) it means that …

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