Signature
C_t = C_s / PPP_s * PPP_t
| Inputs | Definition | Unit |
|---|---|---|
C_s | Cost in the source currency, in the price year whose PPP factors are used | source currency |
PPP_s | Purchasing power parity conversion factor of the source country, local currency units per international dollar | source currency per international dollar |
PPP_t | Purchasing power parity conversion factor of the target country, local currency units per international dollar, equal to 1 when the result is wanted in international dollars | target currency per international dollar |
C_t | Cost expressed in the target currency after conversion at purchasing power parity | target currency |
|---|
Function
Basket-of-countries reference price and currency conversion function
Maps the prices of one medicine observed in a basket of reference countries, each in its own currency, and the exchange rates or purchasing power parities that express them in one currency, to a domestic reference price under an aggregation rule and to a ceiling for a proposed domestic price. The same conversions move any cost record between currencies. A cost from another year is first moved to the common price year with the live price-year adjustment HE-FM-COST-002 of the resource costing function HE-FN-COST-001, and the index itself belongs to the Consumer Price Index concept. A basket price reflects what other countries list, while the economically justifiable price HE-FM-EJP-001 and the break-even price HE-FM-BEA-001 give the highest price at which a technology is cost-effective at home. Notation follows the Basket of Countries article.
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Implementations
Excel
PPP conversion of a cost from named cells
With the cost in CostSourceCurrency and the two factors in PPPSource and PPPTarget, the cell CostTargetPPP returns the converted cost. The cross rate PPPTarget/PPPSource can be held in its own cell and reused for every cost from the same country and year.
=CostSourceCurrency/PPPSource*PPPTarget
Assumptions
PPP factors from one dataset and one year
PPP_s and PPP_t come from the same dataset and the same year, the price year of C_s. The CCEMG-EPPI-Centre Cost Converter page notes that IMF and OECD PPP values differ for OECD countries in all price years, so the dataset is reported with the result.
GDP purchasing power parity as a general price level
The World Bank factor is for the level of GDP, so it reflects prices across the whole economy rather than health care alone. The CCEMG-EPPI-Centre Cost Converter page names health care specific, technology specific and episode specific PPPs as alternatives where the data allow.
Worked examples
Illustrative cost converted at two PPP factors
A cost of 1,000 in a source currency with an illustrative factor of 0.8 per international dollar is 1,250 international dollars, which at a target factor of 0.7 is 875 in the target currency (illustrative values).
C_s = 1000; PPP_s = 0.8; PPP_t = 0.7; C_t = 875
Cost converted into international dollars
With PPP_t set to 1, the base of the international dollar, the same cost becomes 1,250 international dollars, the division by the PPP rate that the WHO applies to local tobacco prices.
C_s = 1000; PPP_s = 0.8; PPP_t = 1; C_t = 1250
Same country as source and target at purchasing power parity
When the two factors are equal the cost is unchanged, a limiting case that checks an implementation.
C_s = 1000; PPP_s = 0.8; PPP_t = 0.8; C_t = 1000
Common errors
PPP ratio inverted
Multiplying by the source factor and dividing by the target factor gives about 1,142.86 in place of 875 in the illustrative example, 31% too high (computed here for illustration). Since both factors are local currency per international dollar, the source factor always divides.
Market-rate and PPP conversions mixed in one comparison
Turner and colleagues treat US dollars at market rates and international dollars as different output currencies, either or both of which a study may report. Adding or ranking costs from several countries when some were converted at market rates and others at PPPs gives figures in no single unit, so one method is used for each comparison and named.
Sources
World Bank definition of the PPP conversion factor
World Bank. World Development Indicators. PPP conversion factor, GDP (LCU per international $), indicator PA.NUS.PPP. Definition, which states that the PPP conversion factor is a currency conversion factor and a spatial price deflator, that PPPs convert different currencies to a common currency and in the process equalise their purchasing power by eliminating differences in price levels between countries, and that the factor is for the level of GDP with the US dollar as base currency (sources International Comparison Program, Eurostat and OECD).
Turner and colleagues on international dollars and PPP exchange rates
Turner HC, Lauer JA, Tran BX, Teerawattananon Y, Jit M. Adjusting for inflation and currency changes within health economic studies. Value in Health. 2019;22(9):1026-1032. Box 1 (page 1027), which defines the international dollar as buying in the country of interest a comparable amount of goods and services as US1 buys in the United States, is used to convert a currency unit to international dollars; and the section on the choice of the output currency (page 1029) on the advantages and limits of international dollars.
WHO division of local prices by IMF implied PPP rates
World Health Organization. Global Health Observatory indicator metadata registry, indicator 4590, Tobacco MPOWER Raise taxes, tobacco and nicotine products retail price. Method of measurement, which states that prices in local currency were divided by the IMF World Economic Outlook implied PPP conversion rates for 2022 for conversion into international dollars, and divided by the IMF rate in national currency per US dollar for conversion into US dollars.
CCEMG-EPPI-Centre Cost Converter on PPP datasets and conversion
EPPI Centre, University College London, with the Campbell and Cochrane Economics Methods Group. CCEMG-EPPI-Centre Cost Converter, version 1.7 (January 2024), web page accessed 18 October 2026. Information for users, section How the tool works, which converts the price-year adjusted cost from the original currency to a target currency with conversion rates based on purchasing power parities for GDP and states that IMF and OECD PPP values differ for OECD countries in all price years; and section Applications of the tool, which names health care specific, technology specific and episode specific PPPs as alternatives.
Canonical Identity
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