Abbr.: PPP. «Effective» external value of a currency determined by comparing different countries' relative price levels. For example, a basket of goods costing USD 100 in the United States and CHF 160 in Switzerland would give a parity rate of CHF 1.60 per USD. Proponents of PPP theory hold the view that an exchange rate will move in the direction of purchasing power parity over the long term or at least reflect the differing price trends.