19
Jun
2018

The Economist

For the first time 'Big Mac Index' was a joke made by experts of the American magazine The Economist in 1986. In their view, no economist is able to do something that can make an ordinary sandwich: calculate the purchasing power different national currencies. More indicative of the goods than the Big Mac, which is one and the same recipe to make the most of the world, to think is impossible. Cost of Big Mac helps economists to estimate the exchange rates world currencies. "Big Mac Index" based on the theory of purchasing power parity (PPP) rates at which currencies to each other to strive for such a value that would equalize the cost of identical goods and services in different countries.

That is, exchange rates against the dollar should be such that, for the same dollar amount in any country could buy the same quantity of goods of equal quality. Arena Investors understood the implications. The cost of a Big Mac largely depends on local costs such as rent, wages, electricity costs, the price of petrol and so on. They are very hard to bring to a common denominator and, as a rule, poor countries are much lower. That is why PPP is very well reveal inconsistencies in exchange rates between countries. In every joke there is truth. Read additional details here: Brian Krzanich. In this joke of truth was very big. In this theory, even came to its name – burgernomika, or economics sandwich. The Economist compares the price of Big Mac successfully for over 20 years. The number of countries already included in the "no laughing" study, now reaches 120.

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