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PPP - WA Currency Converter

The ICP Regional Office for Western Asia (WA) is proud to introduce its newest addition to the ICP website: “The Real Currency Converter”; the fact that this converter uses Purchasing Power Parities, instead of exchange rates used by traditional currency converters, makes this tool the first of its kind.

One of the converter’s main objectives is to extend the usage of PPPs beyond Multinational Corporations, International Development Agencies, policy makers, etc… to include the general public. This will provide a tool with an - easy to use - online interface, which makes it possible to get real estimates of the power of national currencies, based on the results of the 2005 ICP round.

The participating countries in the 2005 ICP Round were: Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, Yemen and Sudan.

 

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Coming Soon

The ICP WA Regional Office is pleased to announce that a more sophisticated version of the converter will be released in the near future; the newer edition is expected to be much more flexible and will include many new features.

 

How does the converter help me?

This converter allows you to convert amounts from numeraire US Dollars to the designated National Currency. Following is an example illustrating the difference between PPP-based and exchange rate-based conversions:

Let us consider a basket of goods and services that costs 1 numeraire US Dollars in country X. When converted to Lebanese Pounds using the exchange rate, the result is 1 500 LBP. However, the result is 847.52 LBP when the conversion is done through the PPP converter at GDP level.

Therefore, we realize that in reality we need 847.52/1500= 0.57 numeraire USD instead of 1 numeraire USD to buy the same basket of goods and services.

Since the conversions through this tool are based on PPPs, the results will thus reflect the real power of the currencies in purchasing a basket of goods and service.

What does the aggregate level mean?

Talking about baskets of goods and services, the PPP has been estimated at different levels of aggregates.

For example, the aggregate level of “Food and nonalcoholic beverages” would represent a basket constituting food products and nonalcoholic beverages purchased for consumption at home, and hence PPP estimated at this aggregate level might interest foreign students planning on receiving their education at the designated country.

Tourists on the other hand would find the aggregate “Restaurants and Hotels” to be more interesting, since it includes accommodations provided by hotels and similar establishments, as well as food products and beverages sold for immediate consumptions away from home.

Economic researchers looking to have an overall estimation of real currency power would be interested in the expenditure-based GDP level.

A detailed explanation of all the aggregate levels offered by the converter can be found in the “Aggregate level definition” below.

Please note that conversions are based on the price levels and expenditure patterns of economies with reference year 2005. The 2011 ICP round will provide updated estimates for currency conversions based on 2011 as a reference year.

AGGREGATE LEVEL DEFINITIONS       

GDP (Gross Domestic Product), expenditure-based, is total final expenditure at purchaser’s prices, including the f.o.b. value of exports of goods and services, less the f.o.b. value of imports of goods and services. Figures are provided by national authorities participating in the ICP and may differ from international organization’s figures.

Actual individual consumption is measured by the total value of household final consumption expenditure, nonprofit institutions (such as NGOs and charities) serving households’ final consumption expenditure, and government expenditure on individual consumption of goods and services (such as education or health).

Food and nonalcoholic beverages include food products and nonalcoholic beverages purchased for consumption at home; excludes food products and beverages sold for immediate consumption away from the home by hotels, restaurants, cafés, bars, kiosks, street vendors, automatic vending machines, and so forth; cooked dishes prepared by restaurants for consumption off their premises; cooked dishes prepared by catering contractors, whether collected by the customer or delivered to the customer’s home; and products sold specifically as pet foods.

Alcoholic beverages and tobacco include alcoholic beverages purchased for consumption at home; include low or nonalcoholic beverages that are generally alcoholic such as nonalcoholic beer; exclude alcoholic beverages sold for immediate consumption away from the home by hotels, restaurants, cafés, bars, kiosks, street vendors, automatic vending machines, and so forth. It also includes all purchases of tobacco by households, including purchases of tobacco in cafés, bars, restaurants, service stations, and so forth.

Clothing and footwear includes expenditures on clothing materials; garments for men, women, and children; other articles of clothing and clothing accessories; cleaning, repair, and hire of clothing; all footwear for men, women, and children; and repair and hire of footwear.

Housing, water, electricity, gas and other fuels includes expenditures on actual and imputed rentals for housing; maintenance and repair of the dwellings; water supply and services related to the dwellings; and electricity, gas and other fuels.

Furnishings, household equipment, and maintenance includes expenditures on furniture and furnishings; carpets and other floor coverings; household textiles; household appliances; glassware, tableware, and household utensils; tools and equipment for house and garden; and goods and services for routine household maintenance.

Health includes expenditures by households on medical products, appliances and equipment, outpatient services, and hospital services. It also includes expenditures by government on health benefits and reimbursements and on production of health services.

Transport includes expenditures on purchase of vehicles, operation of personal transport equipment, and transport services.

Communication includes expenditure on postal services and on telephone and telefax equipment and services.

Recreation and culture includes expenditures on audiovisual, photographic, and information-processing equipment; other major durables for recreation and culture; other recreational items and equipment; gardens and pets; recreational and cultural services; newspapers, books, and stationery; and package holidays.

Education includes expenditures on preprimary, primary, secondary, postsecondary, and tertiary education. It also includes expenditures by government on education benefits and reimbursement and on production of education services.

Restaurants and hotels includes food products and beverages sold for immediate consumption away from home by hotels, restaurants, cafés, bars, kiosks, street vendors, automatic vending machines, and so forth; cooked dishes prepared by restaurants for consumption off their premises; cooked dishes prepared by catering contractors, whether collected by the customer or delivered to the customer’s home. It also includes expenditures on accommodation services provided by the hotels and similar establishments

Collective consumption expenditure by government consists of expenditures incurred by general and local governments for collective consumption services such as defense, justice, general administration, and the protection of the environment. 

Gross capital formation is measured by the total value of a producer’s acquisitions, less disposals, of fixed assets during the accounting period, plus certain additions to the value of nonproduced assets (such as subsoil assets or major improvements in the quantity, quality, or productivity of land) realized by the productive activity of institutional units. 

 

 

 

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