Posted on 07/23/2024 7:17:02 AM PDT by SeekAndFind
What can a Big Mac tell us about currency rates? As it turns out, quite a lot.
The Big Mac Index, created by The Economist in 1986, started out as a simple tool to make currency theory more digestible. Now, it’s a widely-known measure in popular economics to assess and compare currency valuations.
In short, the Big Mac index compares the purchasing power parity (PPP) of currencies using the price of a Big Mac in the U.S. as the benchmark. It shows how much a Big Mac costs in various countries compared to the U.S., but it also works as a way to assess exchange rates.
In this graphic, Visual Capitalist's Kayla Zhu visualizes the price of a McDonald’s Big Mac in U.S. dollars between 13 different countries around the world, the eurozone, and the United States, using the latest January 2024 data from The Economist’s Big Mac Index dataset.
One can use the price of Big Macs in other countries to see if a currency has more or less purchasing power than expected. This is done by taking the local price of a Big Mac (in local currency) and dividing it by the U.S. price of a Big Mac to calculate an implied exchange rate.
This implied exchange rate is then compared against the actual exchange rate between the two currencies; if the implied rate is higher than the actual rate, the local currency is “overvalued”, and if it is lower, the local currency is “undervalued”.
It’s worth noting that this measure is relatively simplistic and doesn’t account for some factors like taxes, local production costs, and market barriers.
Switzerland has the most expensive Big Macs in the world at $8.17 USD, which is 44% more expensive than the price of a Big Mac in the United States. Using the Big Mac Index, that suggests that the Swiss franc is 44% overvalued against the U.S. dollar.
| Country | Price of Big Mac in USD | Big Mac Index (USD) |
|---|---|---|
| 🇨🇭 Switzerland | $8.17 | 43.53% |
| 🇳🇴 Norway | $7.14 | 25.47% |
| 🇺🇾 Uruguay | $7.04 | 23.72% |
| 🇪🇺 Euro area | $5.87 | 3.12% |
| 🇸🇪 Sweden | $5.87 | 3.08% |
| 🇨🇷 Costa Rica | $5.71 | 0.39% |
| 🇬🇧 Britain | $5.71 | 0.36% |
| 🇩🇰 Denmark | $5.69 | 0.03% |
| 🇺🇸 United States | $5.69 | 0.00% |
| 🇱🇰 Sri Lanka | $5.69 | -0.03% |
| 🇨🇦 Canada | $5.56 | -2.37% |
| 🇲🇽 Mexico | $5.19 | -8.74% |
| 🇨🇴 Colombia | $5.09 | -10.60% |
| 🇦🇺 Australia | $5.07 | -10.82% |
| 🇸🇦 Saudi Arabia | $5.07 | -10.97% |
| 🇳🇿 New Zealand | $5.01 | -12.03% |
| 🇵🇱 Poland | $4.97 | -12.74% |
| 🇸🇬 Singapore | $4.96 | -12.88% |
| 🇻🇪 Venezuela | $4.93 | -13.28% |
| 🇦🇪 United Arab Emirates | $4.90 | -13.87% |
| 🇧🇷 Brazil | $4.81 | -15.48% |
| 🇱🇧 Lebanon | $4.80 | -15.56% |
| 🇨🇿 Czech Republic | $4.61 | -18.97% |
| 🇰🇼 Kuwait | $4.55 | -20.05% |
| 🇮🇱 Israel | $4.52 | -20.63% |
| 🇧🇭 Bahrain | $4.51 | -20.74% |
| 🇨🇱 Chile | $4.46 | -21.68% |
| 🇳🇮 Nicaragua | $4.34 | -23.70% |
| 🇵🇪 Peru | $4.25 | -25.32% |
| 🇭🇳 Honduras | $4.13 | -27.37% |
| 🇰🇷 South Korea | $4.11 | -27.81% |
| 🇭🇺 Hungary | $3.98 | -30.11% |
| 🇹🇷 Turkey | $3.97 | -30.29% |
| 🇶🇦 Qatar | $3.85 | -32.42% |
| 🇦🇷 Argentina | $3.83 | -32.61% |
| 🇵🇰 Pakistan | $3.81 | -33.09% |
| 🇹🇭 Thailand | $3.78 | -33.50% |
| 🇬🇹 Guatemala | $3.71 | -34.78% |
| 🇴🇲 Oman | $3.69 | -35.18% |
| 🇲🇩 Moldova | $3.56 | -37.45% |
| 🇯🇴 Jordan | $3.53 | -38.03% |
| 🇦🇿 Azerbaijan | $3.49 | -38.58% |
| 🇨🇳 China | $3.47 | -38.99% |
| 🇷🇴 Romania | $3.42 | -39.85% |
| 🇯🇵 Japan | $3.04 | -46.51% |
| 🇻🇳 Vietnam | $3.01 | -47.06% |
| 🇭🇰 Hong Kong | $2.94 | -48.30% |
| 🇺🇦 Ukraine | $2.94 | -48.37% |
| 🇵🇭 Philippines | $2.86 | -49.74% |
| 🇲🇾 Malaysia | $2.78 | -51.10% |
| 🇪🇬 Egypt | $2.75 | -51.66% |
| 🇿🇦 South Africa | $2.71 | -52.46% |
| 🇮🇳 India | $2.59 | -54.51% |
| 🇮🇩 Indonesia | $2.43 | -57.29% |
| 🇹🇼 Taiwan | $2.39 | -57.95% |
European countries like Switzerland, Norway, and those in the eurozone tend to have more expensive Big Macs than the United States. This indicates that these European currencies may be overvalued relative to the U.S. dollar.
On the other end of the spectrum, several major East Asian economies, including Taiwan, Japan, China, and South Korea, have currencies substantially undervalued against the U.S. dollar, according to the Big Mac Index.
In April, the Bank of America stated it was not bullish “on any currency in Asia” and mentioned the Chinese yuan, South Korean won, and Taiwan dollar under its bearish category. In June, the Japanese yen hit a 38-year low against the dollar.
https://www.zippia.com/advice/how-much-big-mac-costs-states/
vs. MA
are these other countries big macs inclusive or exclusive of tax? I know most countries down break out the taxes you pay on things
I haven’t done it in years, but trick to making your own BIG MAC sauce is by rehydrating dried minced onions. The kind you buy in the spice aisle at your supermarket. Once you’ve rehydrated the onions, you can mix them with thousand island or a ketchup/mayonaise mixture.
There is nothing else special about a Big Mac. It uses the same meat patties they put on their hamburgers and cheese burgers, except that they add lettuce too.
Run with it Don. Everyone consumes them. While gas is a necessity a Big Mac is for ones eating pleasure and they’ve taken it away.
I end up at McDonalds a lot as the daughter wants (and I spoil her). I use the mobile app and if nothing else they have 25% off over $5 deal. Often they have a BOGO for Big Macs. Our last trip I got her a free happy meal using reward points.
[VNCENT]
And you know what they call a Quarter Pounder with Cheese in Paris?
[JULES]
They don’t call it a Quarter Pounder with Cheese?
[VINCENT]
No, they got the metric system there, they wouldn’t know what the ____ a Quarter Pounder is.
[JULES]
Then what do they call it?
[VINCENT]
They call it Royale with Cheese.
[JULES]
Royale with Cheese. What do they call a Big Mac?
[VINCENT]
Big Mac’s a Big Mac, but they call it Le Big Mac.
The only time I visit McDonald’s is when traveling OR when there are no other choices and I’m in a hurry. It’s perhaps 1-2 times annually.
Order a McDouble and have them put big mac sauce and lettuce on it. No charge.
A big mac without the extra bun.
big macs originally sold for 45 cents in 1967
It’s not real meat. It’s lab grown
The report is currency based and does not consider the many other cost variables. It is therefore irrelevant as a currency indicator
In the mid-60s MacDonalds’ All American meal consisted of a hamburger, milk shake and fries, for 50 cents. I remember our small town McDonalds advertising the meal endlessly.
Big Macs SUCK.
Philippines: $2.86
A few yrs back I stopped at a McDonald’s somewhere on Luzon. Specifically, looking for unsweetened tea. Decided to eat there. No Big Macs were on the menu...none. Only one, single patty burger. Now spaghetti, fried chicken, rice were advertised.
Maybe Micky-Ds in the metros carries them. But this specific one was way out in a small town...middle of nowhere and probably catered to the locals.
How is Switzerland “CHE”?
I think just CH, no E
$6.99 in Los Angeles. Confirmed 2 days ago.
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