Where is the cheapest Big Mac?

Article published on Feb. 14, 2009
Article published on Feb. 14, 2009
If you are a fan of junk food and you travel abroad from time to time, I'm sure you noticed that (your favourite?) Big Mac's price is swagging on a wide range. In Hungary it costs 680 HUF (~3.21 USD), in the States it a bit more expensive (3.54 USD) but in Malaysia you can get it only for 1.75 USD. Today one euro is 298.16 HUF according to the HUF/EUR course of exchange.
But this is only one angle to see how strong our currency. There is also an ingenious way to have a look on each currency. This is the Big Mac Index.

To compare the purchasing power parity of two currencies and to provide a tool to measure the extent to which market exchange rates resulted in the same good's prices differ in each countries, economists use the Big Mac Index. This product is enough universal, you can buy it all over the world and it has more or less the same ingredients. Because of this we can suppose that the costs of preparation are similar. Of course this assumption is not right but the Big Mac Index isn't useless. You can calculate with the currencies: valorize or devalue a currency to put them on the same level.

This index has been existing since 1986 and was born as a kind of joke, showed that economist are also human beings. Investment bank UBS AG has taken it seriously and has expanded the idea of the Big Mac Index to include the amount of time that an average worker in a given country must work to earn enough to buy a Big Mac. This could give a more realistic view of the purchasing power of the average worker, as it takes into account more factors, such as local wages.

So if we have a look at Big Mac prices in a given country and we see that it costs more than 3.54 USD, it means that this country's currency is overvalued. Here we can see that amond others, Scandinavian and Swiss currency are overvalued

BigMacIndex_Currencies1 Including the amount of time that an average worker in a given country must work to earn enough to buy a Big Mac helps to show the real picture of the given country. According to this variable the five fastest earned places are in Japan (Tokyo, 10 minutes) and in the United States (Los Angeles, 11 minutes, Chicago and Miami, 12 minutes, New York City, 13 minutes). The five slowest earned places are Colombia (Bogotá, 97 minutes), Kenya (Nairobi, 91 minutes), Indonesia (Jakarta, 86 minutes) and Peru (Lima, 86 minutes) and Venezuela (Caracas, 85 minutes).