Dealing with Defence-Specific Purchasing Power - A Discussion and Further Development on Current Methodology


  • Maria Ädel
  • Andreas Johnson
  • Tobias Junerfält

Publish date: 2022-02-18

Report number: FOI-R--5209--SE

Pages: 49

Written in: English


  • military expenditure
  • defence-specific
  • purchasing power parity
  • market ex-change rates


This report aims at developing the methodology for international comparisons of military expenditure. Previous studies have found that the choice of conversion method when com-paring expenditure between countries can have a substantial impact on outcomes. Traditional conversion methods include market exchange rates (MER) and purchasing power par-ity (PPP) for GDP. However, a defence-specific PPP (DS PPP) is preferable. The contribution of the report is threefold. Firstly, the report provides an overview of methodological issues with the different conversion methods. Secondly, the Swedish military expenditure data is reclassified in order to be comparable to the military expenditure of Poland and the UK. Thirdly, a DS PPP is constructed to compare military expenditure between the afore-mentioned countries. The expectation from previous studies is that the PPP measures should yield higher estimates compared to MER especially for Poland, whereas the difference should be smaller for the UK. The results are in line with the expectations to some extent, but, notably, in the case of Poland the DS PPP estimate does not differ much from the MER estimate. However, the results depend largely on the input values of the DS PPP. This study is a contribution to a topic that needs further discussion.