The Economist just released its an updated iteration
of its famous Big Mac Index, underscoring growing disparities in currency
valuations. For those of you that
aren’t familiar, the Big Mac Index uses the price of a McDonald’s Big Mac
sandwich in different countries as a proxy for measuring purchasing power
parity (ppp), that perennial staple of economics that theorizes a country’s
currency and its inflation rate should move in opposite directions. Thus, where a Big Mac is observed to be more
expensive than in the US, it would suggest that country’s currency is
overvalued relative to the USD. Of course there are numerous other factors in
the local price of a Big Mac, including raw materials and taxes, but the index still
packs a pretty profound punch. Unsurprisingly, the most undervalued currencies can be found in Asia-
notably the currencies of Japan, China, Thailand, Indonesia, etc. The most comparatively expensive Big Macs
(and hence most overvalued currencies) can be found in Europe, especially in
Scandinavia and Northern Europe.
Read More: The Big Mac Index
Original post by Jimmy Atkinson and software by Elliott Back
Tags: No Tags