In addition to being one of the most popular and consumed hamburgers in the world, the Big Mac It is a symbol that can be directly related to the economic prosperity of countries. Beyond evoking in your head the greasy pleasure of cheese or grilled meat, its price is used to measure average purchasing power of each specific region.
The Big Mac Index was created by The Economist in 1986. Its basis is very simple: the money that each citizen pays for this star product of McDonald’s is used as a benchmark for cost of living level in a region or monetary areaIt’s a simple way to understand monetary theory, illustrating it with the price of something as widespread as a Big Mac, almost a pop icon.
What does the Big Mac Index reveal?
The Big Mac Index compares the purchasing power parity (PPP) of currencies using the price of a Big Mac in the United States as a benchmark. It is used to evaluate and compare currency valuations or exchange rates.
“If the cost of a Big Mac is higher in a country than in the United States, the local currency is considered to be overvalued; if it is lower, it is considered to be undervalued,” explains ECOVA Estudios.
Therefore, the price of a Big Mac in another country allows see if a currency has more or less purchasing power than expectedIt is calculated by dividing the local price of a Big Mac (in local currency) by the US price of a Big Mac to calculate a implicit exchange rate. However, it is relatively simplistic as it does not take into account taxes, market barriers or local production costs of the burger.
This implied exchange rate is then compared to 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”.
The following graph of Visual Capitalist allows you View the price of a McDonald’s Big Mac in US dollars across 13 different countries in the world, the Eurozone and the United Statesusing the most recent data from January 2024 from the Big Mac Index dataset compiled by The Economist.
Visual Capitalist
As you can see in the infographic, Switzerland has the most expensive Big Macs in the world at $8.17, which is 44% more than the price of a Big Mac in the United States.Using the Big Mac index, that suggests the Swiss franc is overvalued by 44% against the US dollar.
Switzerland is followed by Norway, Uruguay, the Eurozone and Swedenwith prices above the dollar, suggesting that these European currencies may be overvalued in relation to the US dollar. The countries of central and northern Europe have the greatest purchasing power in the Old Continent.
At the other end of the spectrumseveral major East Asian economies, including Taiwan, Japan, China and South Korea, have currencies that are substantially undervalued against the US dollar.according to the Big Mac Index. It is worth noting that in June, the Japanese yen hit its lowest level in 38 years against the dollar.
You can also Check out the full list of global prices for a Big Mac burger in 2024 in the following graph of Statista.
Today, McDonald’s has more than 41,500 restaurants worldwidehas an estimated brand value of over $221.5 billion and closed 2023 with net profits of more than 8 billion.
Learn how we work at .
Tags: Trending