Exceptions to purchase power parity exist if arbitrage opportunities are limited by characteristics such as perishability or high transportation costs.

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Purchase power parity (PPP) states that in the absence of trade barriers and transportation costs, identical goods sold in different countries should have the same price when their prices are expressed in the same currency. However, in the presence of characteristics such as perishability or high transportation costs, arbitrage opportunities may be limited, resulting in exceptions to PPP. For example, fresh fruits and vegetables may not be easily transported across countries and may have different prices even when their exchange rates and other factors are similar.

Exceptions to Purchase Power Parity Exist If Arbitrage Opportunities Are