Purchasing Power Parity (ppp) Between Comparative Study And Application In China

The current and potential side-effects caused by the long-term increasing unbalance ofreginal economic development cannot be ignored, and it’s more and more obvious that thereal purchasing power of currency across regions differs increasingly. As the growingregional disparities, this paper proposes the Monetary Utility and Regional ComparisonProgram corresponding to the International Comparison Program. In doing this, the paperlearns from the Purchasing Power Parity, and applies the thought of PPP to explain theregional currency purchasing power. Through defining monetary utility we composereginal currency conversion coefficient, and thus re-estimate and research the seizes ofeconomic and social problems such as regional currency purchasing power, the regionaleconomic amount scale and level, regional poverty levels et al. The results offerevidences of gap between reginal currency purchasing power, while overall thepurchasing power of money is weaker for the more developed area(except Beijing), thestronger for the less developed regions.The real reginal economic gap is more narrow,and in the meaning of PPP the regional gaps in China is less than nominal amount.Afterexploring and analyzing the reginal poverty line using currency conversion coefficient,the paper found that the higher is the currency conversion factor, the lower is its unitcurrency purchasing power, so the poverty line is actually underestimated. On thecontrary, the lower is the currency conversion factor, the higher is the unit purchasingpower, and thus the poverty line is actually overestimated. The bias estimation of povertyline leads to the gap between the real poverty and nominal poverty population. Hence wecan see the nominal poverty line can perform well in describing China’s povertypopulation. The paper also studied government transfer payments with unit regionalpurchasing power i.e. regional units of currency utility. In analysis of governmentfinancial transfer payment effects, the results showed that the higher the currencyconversion coefficient, the lower is the unit purchasing power of money, so the smallerof utility,which indicates the government transfer payments "shrink";On the otherhand, the lower is the currency conversion coefficient, the higher the purchasing power,the greater the utility of unit money, the government transfer payment " ferment". Andin particular, the poverty alleviation must be taken action after a prehensive considerationof real poverty line and the regional currency utility.