Interpreting PPPs under a Dual Exchange-Rate System: Evidence from Turkmenistan

Productivity Research Notes (PRN Series), No. 2616 Applying a parallel-market exchange rate to the ICP PPP for GDP can imply an implausibly low price level, apparently suggesting that the PPP is underestimated. An exploratory price survey shows instead that the paradox reflects a mismatch between the economic transactions represented by PPPs and exchange rates. The note argues that meaningful international comparisons require matching PPPs and exchange rates to their intended economic transactions.