Big Mac Index 2009
Big Mac Index 2009
The Big Mac index 2009 compares the price of a Big Mac sandwich across countries. The Big Mac 2009 index published by the Economist is a lighthearted guide to valuing currencies. The Big Mac index 2009 is not the best indicator of international comparison but it can provide some clues.
The Big Mac index 2009 is based on the theory of purchasing-power parity (PPP). The theory of purchasing-power parity says that exchange rates should equalize the price of a basket of goods in each country. The Big Mac 2009 index uses just one item in place of a range of products - that is the Big Mac hamburger which is sold worldwide in about 120 countries. The exchange rate that leaves a Big Mac costing the same in dollars everywhere is perceived by some a fair-value benchmark. The Big Mac purchasing power parity is the exchange rate that would mean hamburgers cost the same in the USA as everywhere else. Comparing actual exchange rates with PPPs indicates whether a currency is undervalued or overvalued.
Big Mac 2009 index explained
The dollar buys the most Big Mac hamburger in South Africa. A Big Mac costs 16,95 rand in South Africa, which is $1.66 at today’s exchange rate which is roughly half its price in the United States ($3.54). You can see that Asian currencies, such as the Thai Baht ($1.77) and Malaysia Ringgit ($1.52) are valued similarly.
On the other hand, the Big Mac is very expensive in Norway ($5.79) and overall in the Eurozone ($4.38). The euro is almost 25% overvalued on the burger gauge. You can see that the Swiss franc remains one of the world’s dearest currencies ($5.60).
Remember, quick conclusions should not be drawn from fast-food prices as they do not reflect variables of the broad economics. The cost of the Big Mac hamburger depends a lot on local inputs, such as rent and wages. These costs are not easily arbitraged across borders and tend to be lower in poorer countries. The Big Mac also is not durable and can hardly be traded across borders.
See here for more information about previous years of the Big Mac index.
Big Mac index 2009
Here is the Big Mac index for 2009:
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