“Big Mac Index”

Big Mac İndex

The “Big Mac Index” is an unofficial index that measures the real value of currencies by comparing the price of a McDonald’s Big Mac hamburger in different countries around the world. Therefore, it is possible to calculate the index only for the countries where the McDonald’s chain is present.

This index has been published in “The Economist” magazine since 1986. The “Big Mac index” shows whether currencies are overvalued or undervalued by taking into account price differences for the same product in different countries. The index is based on the theory of Purchasing Power Parity (PPP).

This indicator helps to better understand currency markets in the global economy. The value of “Big Mac” in the United States is taken as a basis for calculating the index.

For example, according to July 2024 indicators, “Big Mac” was 6.15 manats in Azerbaijan, and 5.69 dollars in the United States. According to these indicators, the exchange rate should have been 1.08 (6.15/5.69), but the actual exchange rate was at the level of 1.70. The difference between these two exchange rates shows that the manat is worthless in real terms by 36.4% (100% — (1.08/1.70)).

Note: According to the July 2024 index, the most valuable currency against the dollar was the Swiss franc (7.10 Swiss francs and 5.69 US dollars), and the least valuable was the Taiwan dollar (75 Taiwan dollars and 5.69 US dollars).