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Risk Management: Foreign Currency and Fuel Price
Published in Peter S. Morrell, Airline Finance, 2019
Purchasing power parity (PPP) theory states that under liberalised international trade a basket of goods in one country should cost the same as a basket of goods in another country. If domestic prices rise in one country, then the exchange rate between that country and another should change to restore the price equality between the two baskets of goods. Exchange rates should, according to this theory, be determined purely by relative price movements. It is doubtful if this would happen even in the long term because of the increasing element of goods and services that are not traded internationally in the basket of typical domestic purchases; in the short or even medium-term many exchange rates persist in being significantly out of line with the rates that equate the price levels in each country. For this reason, the use of market exchange rates causes distortions in international comparisons, for example of airline costs or yields. These can be removed by the use of PPP rates of exchange which are published on a regular basis by the Organisation for Economic Co-operation and Development (OECD) for most major currencies.2
Risk Management: Foreign Currency, Fuel Prices and Interest Rates
Published in Peter S. Morrell, Airline Finance, 2018
Purchasing power parity (PPP) theory states, essentially, that under liberalised international trade a basket of goods in one country should cost the same as a basket of goods in another country. If domestic prices rise in one country, then the exchange rate between that country and another should change so as to restore the price equality between the two baskets of goods. Exchange rates should, according to this theory, be determined purely by relative price movements. It is doubtful if this would happen, even in the long term, because of the increasing element of goods and services that are not traded internationally in the basket of typical domestic purchases; in the short or even medium term, many exchange rates persist in being significantly out of line with the rates that equate the price levels in each country. For this reason, the use of market exchange rates causes distortions in international comparisons, for example of airline costs or yields. These can be removed by the use of PPP rates of exchange which are published on a regular basis by the Organisation for Economic Co-operation and Development (OECD) for most major currencies.3
Forecasting Lubricant Demand
Published in R. David Whitby, Lubricant Marketing, Selling, and Key Account Management, 2023
Purchasing power parity (PPP) is the estimated exchange rate at which the selling prices of a representative basket of goods and services in two countries are broadly equal. Determining the selling prices in both countries is relatively easy, using government-published indices of consumer prices. The difficulty with PPP is in assessing a starting point, which depends on when the prices in both countries were broadly equal and at what exchange rate. Over a long period of time, at least twenty years, a graph of exchange rate against the estimated PPP should show the phases when the rate is above the PPP to be roughly equal to the phases when it is below the PPP.
Internalizing the external cost of gaseous and particulate matter emissions from the coal-based thermal power plants in India
Published in Particulate Science and Technology, 2021
PPP approximates the total adjustment that must be made on the currency exchange rate between countries that allows the exchange to be equal to the purchasing power of each country’s currency. Since the Impact-Pathway-Approach adopted by ExternE takes into account the people’s willingness-to-pay or willingness-to-accept (ExternE 2018) approach, it is an indication of the living standard and purchasing power of a citizen of a country. Hence, it is logical to modify the external cost according to the Purchase Power Parity of an average Indian citizen. Even though the Purchasing Power Parity is taken into consideration, it is observed that consumption of electricity by the majority of rural population in India is much lower than the per capita electricity consumption in India.
Assessing the social costs of urban transport infrastructure options in low and middle income countries
Published in Transportation Planning and Technology, 2020
(2) When the required data for estimation of external cost are not available in a low and middle income country, a Willingness To Pay (WTP) approach can be used in order to transfer from another country where the required data are available (Nellthorp, Bristow, and Day 2007; Gwilliam, Kojima, and Johnson 2004). The WTP estimate from the transfer country is calculated as:where, WTPT, WTPs are WTP estimate from the transfer country (T) and study country (S) respectively (£); IncomeT, IncomeS are Purchasing Power Parity (PPP) income per capita in the transfer country and study country correspondingly (£/year). A PPP is a price index, which provides a measure of price level differences across countries and should be used to convert expenditures in national currencies to a common currency (World Bank 2017). ϵ is the income elasticity of WTP – this can be taken to be 1.0 (Gwilliam, Kojima, and Johnson 2004; Bickel et al. 2005; Maibach et al. 2007).
Model for predicting the success of public–private partnership infrastructure projects in developing countries: a case of Ghana
Published in Architectural Engineering and Design Management, 2018
Robert Osei-Kyei, Albert P. C. Chan
In Ghana and other developing countries, most governments have begun introducing some good economic policies towards PPP arrangements. A notable example is the Viability Gap Fund (VGF) and Project Development Fund (PDF) introduced by the Indian and South African governments respectively (ADB, 2011; USAID, 2005). The prime objective of this good initiative is to make PPP projects bankable and financially attractive to investors particularly foreign investors in both countries. Similarly, the Ghanaian government has set up various funds including Ghana Infrastructure Investment Fund (GIIF), Project Development Facility (PDF) and Viability Gap Scheme. These funds enable public authorities undertake pre-feasibility and full feasibility studies for their proposed PPP projects. In addition, the funds intend to make PPP projects financially attractive to private investors (MOFEP, 2011). Other governments in developing countries rather provide guarantees and joint venture funding as forms of good economic policies towards PPP projects. Taking the N4 toll road project developed in both South Africa and Mozambique, for example, the South African and Mozambique governments provided debt guarantee, which enable the investor to raise the required amount from local financial institutions.