What is Purchasing Power Parity? It is the variation in the value of currencies as illustrated by the Big Mac Index. It is a less robust and less accurate measure of intrinsic value than the Big Mac Index It is the amount that the same notional amount of currency can buy today versus how much the same amount can by if converted spot to another currency, earn deposit interest, and converted back in a 1-yr forward contract. This is the adjustment to the US dollar that needs to be used by academics to account for the fact that it is the de facto international reserve currency