Interactive currency-comparison tool: The Big Mac index | The Economist http://www.economist.

com/content/big-mac-index

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Interactive currency-comparison tool

Global exchange rates, to go

JULY 16TH 2015, BY D.H. & L.D.
Like 37k Tweet 3,978

THE Big Mac index was invented by The Economist in 1986 as a lighthearted guide to whether currencies are at their “correct” level. It is 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 July 2015 was $4.79; in China it was only $2.74 at market exchange rates. So the "raw" Big Mac index says that the yuan was
undervalued by 43% at that time.

Burgernomics was never intended as a precise gauge of currency misalignment, merely a tool to make exchange-rate theory more digestible. Yet the
Big Mac index has become a global standard, included in several economic textbooks and the subject of at least 20 academic studies. For those who
take their fast food more seriously, we have also calculated a gourmet version of the index.

This adjusted index addresses the criticism that you would expect average burger prices to be cheaper in poor countries than in rich ones because
labour costs are lower. PPP signals where exchange rates should be heading in the long run, as a country like China gets richer, but it says little
about today's equilibrium rate. The relationship between prices and GDP per person may be a better guide to the current fair value of a currency. The

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adjusted index uses the “line of best fit” between Big Mac prices and GDP per person for 48 countries (plus the euro area). The difference between
the price predicted by the red line for each country, given its income per person, and its actual price gives a supersized measure of currency under-
and over-valuation.

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Interactive currency-comparison tool: The Big Mac index | The Economist http://www.economist.com/content/big-mac-index

The Big Mac index

July 2015

Select base currency: US dollar Raw index Adjusted index -100 -75 -50 -25 0 25 50
Switzerland
Norway
Raw index Sweden
Zoom to
Under(–)/over(+) valuation against the dollar, % Denmark
United States
Israel
Canada
Britain
Brazil
Uruguay
Euro area
Costa Rica
Australia
New Zealand
Turkey
South Korea
Philippines
UAE
Pakistan
Singapore
Chile
Saudi Arabia
Hungary
Thailand
Peru
Undervalued by: Overvalued by:
Mexico
>50% 10-50% Argentina
–/+ 10% Japan
25-50% 50-100%
Colombia
10-25% >100% Czech Republic
Vietnam
Big Mac prices v GDP per person China
Latest Sri Lanka
Taiwan
8
Poland
c price*, $

Hong Kong
6
Indonesia
4 Egypt

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Interactive currency-comparison tool: The Big Mac index | The Economist http://www.economist.com/content/big-mac-index

User guide:

The 'Select base currency' button allows you to choose from five base currencies: the yuan, the euro, the yen, sterling and the US dollar. You can
also choose to see the index in its original 'raw' form, or adjusted for GDP per person. By default, the panel at the bottom displays a scatter chart
plotting the local price of a Big Mac (expressed in the current base currency) against GDP per person in that country. Select individual points for
details.

As you explore the map, the scatter chart will be replaced by a line chart plotting the highlighted country's under- or over-valuation against the current
base currency over time. You can select a country on the map to 'freeze' it (with the exception of Internet Explorer), allowing you to mouse over/tap
the line chart and see detailed indicators for your selection over time. To 'unfreeze' the map, click/tap on the highlighted country again.

Download the full data-set here

NOTE: As of January 2015, the Big Mac index has been adapted to include Lithuania as part of the euro area.

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Readers' comments

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Sort: Newest first Oldest first Readers' most recommended

1 2 3 4 5 6 7 8 9 … next › last »

Austin James Jan 31st 2013, 15:27

"Burgernomics was never intended as a precise gauge of currency misalignment, merely a tool to make exchange-rate theory more digestible." #youreridiculous.

Recommend 452 Report Permalink Reply

kommonsenses Jan 31st 2013, 15:40

what was a joke of some kind in the beginning of big mac index is now being promoted as some serious entry to economics. but with zero consideration of difference
of dietary cultures of locale for one thing, big mac index in substance remains to be just that, a joke.

Recommend 614 Report Permalink Reply

szuo Jan 31st 2013, 15:42

Economists don't understand that the same burger means different things in different countries. In some countries, McDonalds are upscale restaurants that represent
western life style, while in some other countries, they're just unhealthy fast food. They are fundamentally not the same value.

Recommend 836 Report Permalink Reply

semicontinuous Jan 31st 2013, 15:51

Q: If the price of Swiss chocolate dropped by 63.1% to what the big mac implies is a fair price, why would anyone eat a burger ever again?

Recommend 523 Report Permalink Reply

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Omricon Jan 31st 2013, 15:55

To everyone criticising this index: It has done better than many proffessionals eg it predicted that the Euro was overvalued on launch (most professionals didnt catch
this).

To TE: You get told every time, you should know by now, Argentina have imposed price controls on Big Macs in order to show up well in this index, can they be
excluded yet?

Recommend 587 Report Permalink Reply

DullerBill$ in reply to Austin James Jan 31st 2013, 16:21

Don't get in a flap jack

Recommend 301 Report Permalink Reply

Austin James in reply to semicontinuous Jan 31st 2013, 16:24

I retract my statement.

Recommend 427 Report Permalink Reply

Dialectic18 Jan 31st 2013, 16:59

Interesting that the currencies of large oil producers are both over valued (Venezuela, Norway) and under valued (Saudi, Russia).
.
And, what's up with S. Africa and India?

Recommend 451 Report Permalink Reply

latrucha Jan 31st 2013, 17:07

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Interactive currency-comparison tool: The Big Mac index | The Economist http://www.economist.com/content/big-mac-index

The thing I've never understood about this index is a case like venezuela. I lived there awhile back and things were rediculously cheap. However, the big mac was
not. The big mac I remember cost more there than in my home country of the USA. I thought it was weird that people would eat there consiedering a nearby
venezuelan restuarant would charge about US $1.00 for a 4 course lunch. I did eat at mcds a couple of times and the locals there seemed to be a type of person who
wanted to show off money or say something about their status by being able to eat in a "fancy" western style restaurant.

Recommend 489 Report Permalink Reply

hedgefundguy Jan 31st 2013, 17:08

The January 2012 Big Mac Index had it costing $4.20

.
Today's $4.37 means an inflation rate of 4.05% in 2012.
.
NPWFTL
Regards

Recommend 430 Report Permalink Reply

MBerg Jan 31st 2013, 17:14

I love the BigMac Index. But let's not forget. We know since the late 19th century, thanks to Austrian Economists Menger and Boehm-Bawerk, that the value of goods
is subjective and subjective only.

Recommend 443 Report Permalink Reply

miseshayekrothbard in reply to hedgefundguy Jan 31st 2013, 17:14

How about the official inflation rate of US in 2012? Is it 4% or lower/higher?

Recommend 416 Report Permalink Reply

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condottiero Jan 31st 2013, 17:32

Could we try measuring this rather in the price of the döner kebap and see if there is some correlation? It would be fun to learn something from this! :D

Recommend 452 Report Permalink Reply

condottiero Jan 31st 2013, 17:40

Perhaps, we could try also measuring this in the price of the rice bowls to find out if there is some type of correlation? It would be fun to learn something a little more
meaningful (not that this index is useless of course) but just to make it a little more global and avoid to continue reproducing western-centric stereotypes of cultural
and economic values. It may be about time to change the McDonald's measure for some tacos and/or döner kebaps. :)

Recommend 432 Report Permalink Reply

Feretchart Jan 31st 2013, 17:42

But you forgot to mention that in Argentina there are "two dollars". If you consider the official or the blue dollar, the result is different than you show here.

Recommend 425 Report Permalink Reply

yuya105 Jan 31st 2013, 17:48

The key to this index is the raw index vs the index adjusted for GDP per person. In the Raw data it looks as thought the US maintain's a reasonably stable currency,
but once you click on the adjusted for GDP figure it is clear that the USD has devalued sharply compared to a basket of currencies. Australia has also moved from
from the top part of the chart to close to the bottom! As this infographic on currency wars shows the race to the bottom has already begun. http://ow.ly/hiSDO

Recommend 422 Report Permalink Reply

Feretchart Jan 31st 2013, 17:55

But you forgot to mention that in Argentina there are "two dollars". If you consider the official or the blue dollar, the result is different than you show here. Meanwhile,

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the price was manipulated by the goverment, doing the Big Mac cheaper than other countries (in "official dollar" terms).

Recommend 429 Report Permalink Reply

hedgefundguy in reply to miseshayekrothbard Jan 31st 2013, 18:06

It was lower, 1.7% (not Seasonally Adjusted)

.
http://www.bls.gov/news.release/cpi.nr0.htm
.
NPWFTL
Regards

Recommend 411 Report Permalink Reply

MichaelTheGringo Jan 31st 2013, 18:22

I'd love you to do this same treatment for a gallon/liter or regular gasoline as well.

Recommend 85 Report Permalink Reply

MichaelTheGringo in reply to latrucha Jan 31st 2013, 18:26

I'd believe an egomaniac like Chavez would put price controls on Big Mac's just so his country appeared "first" on this list.

Recommend 60 Report Permalink Reply

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