15/01/2019

Extra value

Ranking topics: The Big Mac index

 

Produced with the same seven ingredients across more than 36,000 restaurants in over 100 countries, the burger’s consistency is the secret sauce behind our lighthearted guide to exchange rates. The index is based on the theory of purchasing-power parity, which states that currencies should adjust until the price of an identical basket of goods—or in this case, a Big Mac—costs the same everywhere. Our latest index suggests that most currencies are undervalued against the dollar, which looks stronger than at any point in three decades. In Russia, for example, the burger costs 110 roubles ($1.65), compared with $5.58 in America. That suggests the rouble is 70% undervalued against the greenback. In the short term, such deviations from burger parity may persist due to changes in monetary policy or investors’ appetite for risk. Over long periods, however, burgernomics tend to prevail. Something for investors to chew on.

Explore the full interactive version of the Big Mac index here.