Thursday, 4 August 2011

Big Mac index 2011 and currency rates. UPDATE.

The Economist has been putting this chart out since 1986 and has improved with a second measure that adjusts for the productive wealth of the country as well as the exchange rate. Of interest this year: The Yuan appears fairly valued, the Euro a little overvalued and Brazil & Argentina's currencies appear grossly over-valued against the dollar.  Link  h/t Hot Air.

The BMI has been evaluated in a math & economics paper from Clement et al at the University of Western Australia. (link is to a pdf)   The abstract says if you correct for some bias and don't try short term predictions, the index is at least as good as the industry standard, the Random Walk model in predicting future currency values.  They offer a chart in the index:
Update:  Some other cross-currency samplings have been done (A tall latte and an ipod). A pack of cigarettes and a 5 year old Toyota would be interesting examples to pursue.   And from M. Saleem, a vivid graphic summary:
The Big Mac Index
Via: Online MBA Blog

No comments:

Post a Comment