Big Mac Index and the British Economy

August 28, 2012

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Is the British Pound a “shadow of it’s former self?”  Possibly, if you take the Big Mac Index as an indication.  In reality, that actually depend on the goals of the central banks.  Sure, the Pound went from 18% overvalued to 4% undervalued in a matter of 5 years, but is an undervalued currency necessarily a bad thing?  China has been systematically devaluing their currency, the Yuan, for years in order to increase exports (see the comparison between the Big Mac Index 2007 and the Big Mac Index 2012).

 

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