Thursday, July 16, 2009

Big Mac Index

The Big Mac Index is an attempt to measure purchasing power parity among currencies. The theory is that a Big Mac should cost the same no matter where you buy it. If it costs much more to buy in a country than in the US, then the idea is that the currency of that country is overvalued compared to the dollar.

The current index shows that the European currencies are generally overvalued and the Asian currencies generally undervalued compared to the dollar.

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