Currency conversions for construction cost comparisons: Purchasing power parities and exchange rates

The method used to convert construction costs to a common currency can have significant effects on the results obtained from comparative studies. The relationship between purchasing power parities (PPPs), both general and construction-specific, and market exchange rates with respect to the Australian dollar and three other major currencies was examined over the period 1990-2003. Trends over time were identified using linear regression and it was shown that there is little consistency in the relationship between general PPPs, average exchange rates and other indices. This highlights the need for reliable industry-specific conversion factors as currently there is no method available that can be shown to be more reliable than any other, and studies that do not include rigorous testing of the conversion approach used must produce questionable results.