The Big Mac Index

by Jessica Guenard-Valiquette on March 18, 2010

We thought that this was an interesting approach to comparing the world’s currencies.

Check out this article found on the website www.economist.com

Taste and see

Burgernomics shows the Chinese yuan is still undervalued

Jan 6th 2010 | From The Economist online

THE Big Mac index is based on the theory of purchasing-power parity (PPP)—exchange rates should equalise the price of a basket of goods in different countries. The exchange rate that leaves a Big Mac costing the same in dollars everywhere is our fair-value benchmark. So our light-hearted index shows which countries the foreign-exchange market has blessed with a cheap currency, and which it has burdened with a dear one. The most overvalued currency against the dollar is the Norwegian kroner, which is 96% above its PPP rate. In Oslo you can expect to pay around $7 for a Big Mac. At the other end of the scale is the Chinese yuan, which is undervalued by 49%. The euro comes in at 35% over its PPP rate, a little higher than half a year ago.

BigMac

Peter says :

“I’m just wondering, if a Big Mac is $3.97 in Canada and $1.83 in China, is it possible that the Beijing burger leaves you hungry an hour later?”

{ 2 comments… read them below or add one }

1 diabetes diet October 27, 2010 at 10:16 am

Great site! Continue the good entries.

2 Diabetes Diet October 27, 2010 at 10:54 am

This is the kind of thing I try to teach people. Can we count on a sequel?

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