Jan 12th 2012, 16:53 by The Economist online
Burgernomics shows Switzerland has the most overvalued currency
THE ECONOMIST's Big Mac index is based on the theory of purchasing-power parity: in the long run, exchange rates should adjust to equal the price of a basket of goods and services in different countries. This particular basket holds a McDonald's Big Mac, whose price around the world we compared with its American average of $4.20. According to burgernomics the Swiss franc is a meaty 62% overvalued. The exchange rate that would equalise the price of a Swiss Big Mac with an American one is SFr1.55 to the dollar; the actual exchange rate is only 0.96. The cheapest burger is found in India, costing just $1.62. Though because Big Macs are not sold in India, we take the price of a Maharaja Mac, which is made with chicken instead of beef. Nonetheless, our index suggests the rupee is 60% undercooked. The euro, which recently fell to a 16-month low against the dollar, is now trading at less than â?¬1.30 to the greenback. The last time we served up our index in July 2011, the euro was 21% overvalued against the dollar, but it is now just 6% overvalued. Other European currencies have also weakened against the dollar since our previous index, notably the Hungarian forint and Czech koruna, which have fallen by 23% and 16% respectively. Six months ago both currencies were close to fair value, but they are now undervalued by 37% and 18%.
For the full data set see here.
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My math shows the price of a Big Mac rose at an annual rate of 6.49% from the July 2011 price of $4.07
I guess you don't deserve a break today when you eat at McDonald's
Regards
Uruguay high? Guay?
My humble agreement re the Swiss Franc
This is cock and bull. Chicken burgers aren't Big Macs.
If you win the Big Mac war, you still have to deal with high cholesterol.
My "research" shows that the cheapest Big Mac is in North Korea. Though because Big Mac is not sold in North Korea, I take the price of Kim Mac, which is made from clay patties with used oil in between.
There is some difficult to find a Mcdonald's,needless to buy a Big Mac.Perhaps it will be next "Kodak" in near future.
India has the cheapest Big Mac because it replaces the beef patty with chicken.
So Big Mac is costlier in China than in Hong Kong -- in fact Hong Kong's Big Mac is almost the cheapest even though it is one of the most expensive city in the world.
In conclusion, price is not directly related to cost.
The big Mac Price embodies the cost of doing business in the country (rents, raw materials, labor) and not just whether the currency is over or undervalued. Big Macs are not a fungible market!
According to the Big Mac Index, India's rupee has always been undervalued every year.
But if anyone believes in it and bet on that the rupee will tilt towards parity like the Euro did in the last year, then probably he has to sell his house.
Last year, the rupee dropped 17% against the greenback.
A sad true is that the real price of a Big Mac in Argentina is around $8. This will make said country to advance up to #1 in the ranking. With a large difference. The secret is that, due to pressure mechanisms applied by local government, they obliged McDonald's to freeze Big Mac's price. While the rest of the hamburgers cost between $6,90 and $9,25, the Big Mac costs only $4,64 as is the only hamburger included in this list!!!! Suspicious, ins't it? Typical underdeveloped country policy "against" inflation...
Just a thought, but the nations at the bottom of the graph above appear to be nations that I would not expect to have much demand for a Big Mac (or perhaps the Big Mac is not very popular given that McDonald's does not have much of a footprint in these nations). The nations at the top of the graph above likely have demand for Big Macs, and given that the price of beef around the world is higher than in the United States, their ratio of Big Mac relative price to exchange rate will be off.
The Big Mac is not a basket of goods. It is beef.
isnt the price of a big mac likely to be distorted as well because of taxation? i recently read of peru considering a tax on "junk food" in an effort to discourage its overconsumption... but more seriously, brazil has one of the worlds most complex and largest combined tax burdens which affect consumer goods - should the index be adjusted for the relative tax burdens affecting this particular good?
On this blog we publish a new chart or map every working day, highlight our interactive-data features and provide links to interesting sources of data around the web. The Big Mac index, house-price index and other regular features can be found on our Markets & data page
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