International Monetary Econ
The price of a Big Mac varies around the world, and has been used (albeit not seriously) as a means of testing currency exchange rate parity. The prices of a Big Mac around the world are gathered in the Big Mac Index found on Oanda. The price of a Big Mac in U.S. dollar terms using current spot rates and July 28, 2011 Big Mac prices are as follows:
Country
Local Price
USD Price
USA
China
¥14.7
Brazil
R$9.50
Germany
€3.44
India
Japan
¥320
Russia
p
Switzerland
To calculate the predicted exchange rate, the local currency price should be divided by dollars. Thus the exchange rate implied by the price of a Big Mac is as follows:
Country
Implied Exchange Rate
USA
1.000
China
3.612
Brazil
Germany
0.8452
India
20.6388
Japan
78.624
Russia
1.658
Switzerland
1.597
According to the Big Mac parity theory, currencies whose values diverge from their Big Mac Index should move towards parity.
Country
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