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How do you define the term "Purchasing Power Parity"? Does it hold in practical situations?
In a very plain term PPP means a concept where purchasing power of currencies of different countries is cosidered to be same. For example if some will be able to buy a Sony32" LED TV in India at19,200 INR, the same should be available in Saudi Arabia at1,200 SAR keeping the exchage rate as1SAR=16INR prevalent.Now whether it holds good in practical terms or not depends on some of the most buying things internatinally. For example say Gold. Every Govt. tries to keep PPP relevant for Gold by imposing import duty, banning gthe certain quantum of import etc. as gold is frequently traded arlticle internationally. So we can say in most of the cases it is prevailing practically but not in all cases.
