Foreign price or cost converted to the home currency at a market exchange rate

Signature

c_i = p_i * e_i

Function

Basket-of-countries reference price and currency conversion function

Computational function

• Computational function for a foreign cost moved to a target price year and currency in either order

  Takes a cost in the source currency and its price year, price indices of the source and target countries, and the exchange rates of the costing year and the base year, and returns the cost in the target currency at base-year prices by the two orders that Turner and colleagues compare. Method 1 converts at the costing-year rate and then inflates with the target country's index. Method 2 inflates with the source country's index and then converts at the base-year rate, the order of the two stages of the CCEMG-EPPI-Centre Cost Converter. Each inflation step is the live price-year adjustment HE-FM-COST-002 and each conversion is HE-FM-BOC-001, or HE-FM-BOC-002 at purchasing power parity. The inputs therefore differ from the formula's variables, which describe one conversion.

  Inputs and outputs: C_a is the cost in the source currency at the prices of the costing year a. I_a and I_b are the source country's price index in years a and b, such as a GDP deflator. J_a and J_b are the target country's index in the same years. e_a and e_b are target-currency units per source-currency unit in the costing year and the base year; for a conversion at purchasing power parity e_b is PPP_t/PPP_s of year b from HE-FM-BOC-002. C_m1 and C_m2 are the results of methods 1 and 2 in the target currency at base-year prices, and gap is C_m2/C_m1.

  Assumption: Each index is used in one base for both years. For studies in low- and middle-income countries Turner and colleagues recommend splitting a cost into tradable and nontradable resources where possible (their method 3, not computed here), and otherwise method 1 when tradable resources dominate and method 2 when nontradable resources dominate.

  Worked example (Turner and colleagues' Vietnamese cost, 2006 to 2016): VND1,000,000 in 2006 prices. The factor 2.360037 is the Vietnamese inflation implied by their Figure 1B and 1.1684 the US inflation implied by the abstract's US$116.84 for US$100; the rates are 15,994 dong per US dollar in 2006 and 21,935 in 2016. Method 1 gives US$73.05 and method 2 US$107.59, as in Figure 1, so method 2 is about 47% higher. C_a = 1000000; I_a = 1; I_b = 2.360037; e_a = 0.0000625234; e_b = 0.0000455893; J_a = 1; J_b = 1.1684; C_m1 = 73.05; C_m2 = 107.59; gap = 1.4728

  Worked example (Illustrative purchasing power parity conversion): A cost of 1,000 with illustrative source and target indices rising by 10% and 4%, and a PPP cross rate of 0.875, 0.7 over 0.8, in both years (illustrative values). C_a = 1000; I_a = 100; I_b = 110; e_a = 0.875; e_b = 0.875; J_a = 100; J_b = 104; C_m1 = 910; C_m2 = 962.5; gap = 1.0577

  Worked example (Equal inflation and an unchanged rate): With the same index in both countries and the same rate in both years the two orders agree, a limiting case. C_a = 1000; I_a = 100; I_b = 110; e_a = 0.5; e_b = 0.5; J_a = 100; J_b = 110; C_m1 = 550; C_m2 = 550; gap = 1

  Excel: =CostOriginal*RateCostingYear*TargetIndexBase/TargetIndexOriginal returns method 1 into CostMethodOne and =CostOriginal*SourceIndexBase/SourceIndexOriginal*RateBaseYear returns method 2 into CostMethodTwo. For a conversion at purchasing power parity RateBaseYear holds =PPPTarget/PPPSource for the base year.

  R: cost_two_orders <- function(C_a, I_a, I_b, e_a, e_b, J_a, J_b) { m1 <- C_a*e_a*J_b/J_a; m2 <- C_a*I_b/I_a*e_b; c(C_m1 = m1, C_m2 = m2, gap = m2/m1) } The call cost_two_orders(1e6, 1, 2.360037, 1/15994, 1/21935, 1, 1.1684) returns 73.05, 107.59 and 1.4728 when rounded.

  Python: def cost_two_orders(C_a, I_a, I_b, e_a, e_b, J_a, J_b): m1 = C_a*e_a*J_b/J_a; m2 = C_a*I_b/I_a*e_b; return m1, m2, m2/m1 Plain Python with no imports.

  Test (Turner and colleagues' method 2 reproduced): With the first worked example's inputs CostMethodTwo is within 0.01 of US$107.59. Expected result TRUE. Converting at the costing-year rate instead, which is equivalent to the incorrect route of their Figure 4 (derived here), gives about 147.56 and makes it FALSE. Excel check =ABS(CostMethodTwo-107.59)<0.01

  Test (Orders agree under equal inflation and an unchanged rate): With the third worked example's inputs CostMethodOne equals CostMethodTwo. Expected result TRUE. FALSE shows the rate divided into the cost in one cell; dividing by 0.5 in method 1 gives 2200 against 550. Excel check =ABS(CostMethodOne-CostMethodTwo)<1E-9

  Common error (Local inflation applied to a cost already in US dollars): Inflating Turner and colleagues' US$62.52 by the Vietnamese factor 2.36 gives US$147.55 against the correct US$107.58 of their Figure 4, about 37% too high, because the change in the exchange rate between 2006 and 2016 is ignored. The cost is first converted back to dong at the 2006 rate.

  Source: 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. Adjustment methods 1 and 2 (pages 1030 and 1031), Figures 1 and 4, and the Conclusions on the choice of method. 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. Section How the tool works, on the two-stage computation that first adjusts the price year with a GDP deflator index in the original currency and then converts the currency with purchasing power parities for GDP.

  C_m1 = C_a * e_a * J_b / J_a; C_m2 = C_a * I_b / I_a * e_b; gap = C_m2 / C_m1

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Implementations

• Excel

  Basket price conversion from named cells

  With the foreign price in ForeignPrice and a rate in home currency per foreign unit in HomePerForeignRate, the first formula returns the value held in ConvertedPrice. The second applies when the rate is published as foreign units per home unit, held in ForeignPerHomeRate. The third uses the PMPRB style average of 36 monthly rates in the range MonthlyRates, each in home currency per foreign unit.

  =ForeignPrice*HomePerForeignRate; =ForeignPrice/ForeignPerHomeRate; =ForeignPrice*AVERAGE(MonthlyRates)

Assumptions

• Exchange rate quoted as home currency per unit of foreign currency

  e_i is home currency per unit of foreign currency. The GLOBE Model final rule expresses its rates as local currency units per US dollar and converts net sales to US dollars by dividing by them, so a rate in that form enters as 1 divided by the published figure.

• Rate period stated and applied to every price from one country

  The rate is an average over a stated period and the same rate converts every price from one country. The PMPRB Guidelines in force from 1 January 2026 convert filed prices into Canadian dollars with the simple average of 36 monthly average noon spot exchange rates published by the Bank of Canada, and the GLOBE Model final rule uses one rate per reference country for each quarter, rounded to 3 decimal places.

Worked examples

• GLOBE reference country A rate of 0.800 applied to an illustrative price

  The GLOBE Model final rule's illustrative reference country A has an exchange rate of 0.800 local currency units per US dollar, so e_i is 1.25 US dollars per unit. An illustrative price of 120 in that currency converts to 150 US dollars, the same as dividing 120 by 0.800.

  p_i = 120; e_i = 1.25; c_i = 150

• Vietnamese cost converted at the 2016 rate in Turner and colleagues' example

  In the method 2 example of Turner and colleagues a cost of 2,360,037 Vietnamese dong in 2016 prices is converted at 21,935 dong per US dollar, so e_i is 1 divided by 21,935, about 0.0000455893 US dollars per dong, and the cost is US$107.59, as in their Figure 1B.

  p_i = 2360037; e_i = 0.0000455893; c_i = 107.59

• Basket price already in the home currency

  When a basket price is already expressed in the home currency, as in the article's worked example, the rate is 1 and the converted price equals the observed price, a limiting case that checks an implementation.

  p_i = 95; e_i = 1; c_i = 95

Common errors

• Exchange rate applied in the wrong direction

  Multiplying by a rate published as local currency units per US dollar, in place of dividing by it, turns 120 at 0.800 into 96 US dollars instead of 150, a 36% understatement (computed here for illustration). For a currency quoted at thousands of units per US dollar the result is wrong by the square of the rate.

• Exchange rate taken from a different period than the price

  Turner and colleagues report that the market rate for Myanmar moved from 5.44 kyat per US dollar in 2011 to 640.65 in 2012. Converting 1,000 kyat at the 2011 rate gives about US$183.82 and at the 2012 rate about US$1.56, a factor of about 118 (computed here for illustration), so the rate period is matched to the price and reported.

Sources

• Turner and colleagues on market exchange rates and their volatility

  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 market exchange rate as the rate that determines a currency's value in relation to other currencies; the section on the choice of the output currency (page 1029), which notes that market exchange rates can vary significantly even over short periods and gives the Myanmar rates of MMK5.44 per US dollar in 2011 and MMK640.65 in 2012; and Figure 1 (page 1030), which converts VND2,360,037 in 2016 prices to US$107.59 at 21,935 dong per US dollar.

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• PMPRB conversion of filed foreign prices at a 36-month average exchange rate

  Patented Medicine Prices Review Board. Guidelines for PMPRB Staff, in effect 1 January 2026. Paragraph 47, under Review Process, which states that staff convert local currency prices filed for the Schedule Countries into Canadian dollars using exchange rates calculated as the simple average of the thirty-six monthly average noon spot exchange rates published by the Bank of Canada.

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• GLOBE Model conversion of reference-country prices to US dollars

  Centers for Medicare and Medicaid Services. Global Benchmark for Efficient Drug Pricing (GLOBE) Model. Final rule. Federal Register. 2026;91:62936 (published 2 October 2026). Preamble section II.G.6.b (page 63037), which converts net sales from local currency to US dollars by dividing by an exchange rate with 3 decimal places expressed as local currency units per US dollar, 0.800 for reference country A; section II.G.6.c on exchange rate considerations; and 42 CFR 513.610(c)(2)(i)(A)(3) (page 63113), one rate per reference country for the quarter from the World Bank Atlas, IMF, Federal Reserve or country-specific sources.

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Canonical Identity