Disparities in Purchasing Power Parity: A Cross-Country Examination of Economic and Social Factors

As a method to compare living standards and overall growth in different nations, purchasing power parity is a well-researched and established economic theory. The work examines the differences in countries' economic and statistical PPP correlations by focusing on three potential causes of purchasing power parity deviations: development status, trade openness, and population size. This work selects data over fifty years and over 120 countries to investigate how these factors influence PPP deviations using unsupervised machine learning and econometric techniques. In this work, regression analysis is applied to research the effects resulting from these factors. The result shows that developed countries have fewer PPP deviations compared with developing countries, greater trade openness is instrumental in reducing PPP deviations, and small populations tend to exacerbate these deviations. Our study offers insight into managing PPP in the long run and includes all types of countries.