![]() In Switzerland McDonald's customers have to fork out SFr6.50 ($6.62), which implies that the Swiss franc is overvalued by 19%. That suggests the rouble is undervalued by 70% against the greenback. In Russia, for example, a Big Mac costs 110 roubles ($1.65), compared with $5.58 in America. By this metric most exchange rates are well off the mark. The result is that the greenback itself looks stronger, relative to fundamentals, than at any point in three decades The Big Mac index is based on the theory of purchasing-power parity (PPP), 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. According to our latest batch of data, almost every currency is undervalued against the dollar. This consistency is the secret sauce in the Big Mac index, The Economist's lighthearted guide to exchange rates. ![]() Note: Outlook saves any information about the sender that is stored in the Exchange. On the Message menu, point to Sender, and then select Add to People. Composed of seven ingredients, the double- decker sandwich is produced in nearly identical fashion across more than 36,000 restaurants in over 1oo countries. Tip: If the message is part of a conversation, expand the conversation, and then select the message that you want. HE BIG MAc, the flagship burger of the McDonald's fast-food chain, is a model of consistency. For those who take their fast food more seriously, we also calculate a gourmet version of the index for 55 countries plus the euro area. Yet the Big Mac index has become a global standard, included in several economic textbooks and the subject of dozens of academic studies. Burgernomics was never intended as a precise gauge of currency misalignment, merely a tool to make exchange-rate theory more digestible. 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. Transcribed image text: The Big Mac index Our interactive currency comparison tool Jan 10th 2019 THE Big Mac index was invented by The Economist in 1986 as a lighthearted guide to whether currencies are at their "correct" level.
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