Data

PPP conversion factor for private consumption

What you should know about this indicator

Purchasing power parity (PPP) conversion factor is a spatial price deflator and currency converter that controls for price level differences between countries, thereby allowing volume comparisons of gross domestic product (GDP) and its expenditure components. This conversion factor is for household final consumption expenditure.

Limitations and exceptions: Global PPP estimates provided by ICP are produced by the ICP Global Office and regional implementing agencies, based on data supplied by participating countries, and in accordance with the methodology recommended by the ICP Technical Advisory Group and approved by the ICP Governing Board. As such, these results are not produced by participating countries as part of their national official statistics.

PPPs are not recommended use: As a precise measure to establish strict rankings of countries | As a means of constructing national growth rates | As a measure to generate output and productivity comparisons by industry | As an indicator of the undervaluation or overvaluation of currencies | As an equilibrium exchange rate.

Statistical concept and methodology: PPPs are both currency conversion factors and spatial price indexes. PPPs convert different currencies to a common currency and, in the process of conversion, equalize their purchasing power by controlling differences in price levels between countries.

Typically, higher income countries have higher price levels, while lower income countries have lower price levels (Balassa-Samuelson effect). Market exchange rate-based cross-country comparisons of GDP at its expenditure components reflect both differences in economic outputs (volumes) and prices. Given the differences in price levels, the size of higher income countries is inflated, while the size of lower income countries is depressed in the comparison. PPP-based cross-country comparisons of GDP at its expenditure components only reflect differences in economic outputs (volume), as PPPs control for price level differences between the countries. Hence, the comparison reflects the real size of the countries.

The International Comparison Program (ICP) estimates PPPs for the world’s countries. The ICP is conducted as a global partnership of countries, multilateral agencies, and academia. The most recent 2017 ICP comparison covered 176 countries, including 47 Eurostat-OECD countries. For countries that have not participated in ICP comparisons, the PPP are imputed based on a regression model.

ICP estimated PPPs cover years from 2011 to 2017. WDI extrapolates 2011 PPPs for years earlier years, and 2017 PPPs for later years. Description of WDI extrapolation approach is available here: https://datahelpdesk.worldbank.org/knowledgebase/articles/665452-how-do-you-extrapolate-the-ppp-conversion-factors

For the member countries of Eurostat-OECD PPP Programme, PPP conversion factors are periodically updated based on the organizations’ databases. For Eurostat-OECD PPP Programme, please refer to the following websites. (http://www.oecd.org/sdd/prices-ppp/) (https://ec.europa.eu/eurostat/web/purchasing-power-parities/overview)

For more information on the ICP and PPPs, please refer to the ICP website at https://www.worldbank.org/en/programs/icp.

Source
Multiple sources compiled by World Bank (2024) – processed by Our World in Data
Last updated
May 20, 2024
Next expected update
May 2025
Date range
1990–2022
Unit
LCU per international $

Sources and processing

This data is based on the following sources

The World Development Indicators (WDI) is the primary World Bank collection of development indicators, compiled from officially-recognized international sources. It presents the most current and accurate global development data available, and includes national, regional and global estimates.

Retrieved on
May 20, 2024
Citation
This is the citation of the original data obtained from the source, prior to any processing or adaptation by Our World in Data. To cite data downloaded from this page, please use the suggested citation given in Reuse This Work below.
World Bank's World Development Indicators (WDI).

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“Data Page: PPP conversion factor for private consumption”. Our World in Data (2024). Data adapted from Data compiled from multiple sources by World Bank. Retrieved from https://ourworldindata.org/grapher/ppp-conversion-factor-for-private-consumption [online resource]
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Multiple sources compiled by World Bank (2024) – processed by Our World in Data

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Multiple sources compiled by World Bank (2024) – processed by Our World in Data. “PPP conversion factor for private consumption” [dataset]. Data compiled from multiple sources by World Bank, “World Development Indicators” [original data]. Retrieved July 23, 2024 from https://ourworldindata.org/grapher/ppp-conversion-factor-for-private-consumption