Big Mac Index

In: Food Global Economy Interactive

28 Jan 2014

The Economist has updated their annual Big Mac Index.

…based on the theory of purchasing-power parity (PPP), the notion that in the long run exchange rates should move towards the rate that would equalise the prices of an identical basket of goods and services (in this case, a burger) in any two countries. For example, the average price of a Big Mac in America in January 2014 was $4.62; in China it was only $2.74 at market exchange rates. So the “raw” Big Mac index says that the yuan was undervalued by 41% at that time. Burgernomics was never intended as a precise gauge of currency misalignment, merely a tool to make exchange-rate theory more digestible.

Interesting footnotes: India’s Maharaja Mac is made out of chicken.

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