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Interactive currency-comparison tool: The Big Mac index

Interactive currency-comparison tool: The Big Mac index
January 22nd 2015, by D.H. & R.L.W. THE Big Mac index was invented by The Economist in 1986 as a lighthearted guide to whether currencies are at their “correct” level. It is based on the theory of purchasing-power parity (PPP), the notion that in the long run exchange rates should move towards the rate that would equalise the prices of an identical basket of goods and services (in this case, a burger) in any two countries. For example, the average price of a Big Mac in America in January 2015 was $4.79; in China it was only $2.77 at market exchange rates. So the "raw" Big Mac index says that the yuan was undervalued by 42% at that time. Burgernomics was never intended as a precise gauge of currency misalignment, merely a tool to make exchange-rate theory more digestible. User guide: The 'Select base currency' button allows you to choose from five base currencies: the yuan, the euro, the yen, sterling and the US dollar. Download the full data-set here

http://www.economist.com/content/big-mac-index

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