Purchasing power parity calculator
Compare what the same thing costs in two countries, find the exchange rate that would make the prices equal, and see which currency looks cheap or expensive, Big Mac Index style. Free, no sign-up, nothing leaves your browser.
- 1Type in your own numbers
- 2The tool works it out
- 3See the answer clearly
Use the same item or basket in both countries and today's exchange rate; the starting numbers are only an example. PPP is a long-run yardstick, not a forecast of where a rate will go.
A simple example
Purchasing power parity (PPP) is the idea that, over time, exchange rates should move so that the same basket of goods costs the same in different countries once prices are converted into one currency. If a basket of shopping costs £100 in the UK and $150 in the US, PPP suggests an exchange rate of $1.50 to the pound. If the market rate is different, one currency looks cheap or expensive by that measure.
Why rates drift from PPP
Many things, like haircuts and rent, can't be traded across borders. Taxes, transport costs and local wages differ, and interest rates and investment flows move currencies day to day. The Economist has published the Big Mac Index since 1986 as a light-hearted way to show which currencies look over- or undervalued against PPP.
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