The Big Mac Index is based on the concept of Purchasing Power Parity (PPP). That said, PPP holds better in situations where the costs of transporting the good are small or non-existent. This opens up the opportunity for arbitrage which is basically buying a good in a place where it’s cheap and selling it in
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We’ve all been shocked when traveling to see how expensive or cheap local food is compared to what were used to. These differences can seem even more pronounced when you use the nominal exchange rate (dollars per pound or yen per dollar etc). If however you use a PPP adjusted exchange rate like the Big
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Dr. Steve Sjuggerud of Daily Wisdom thinks that the Euro is on a downward trajectory. Why? Of course it’s partially because of the issues that are happening currently in the Eurozone, Greece’s debt problems, and the fear of contagion to other Eurozone countries. One of his major arguements however is the Big Mac Index. “One
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The Won/Dollar exchange rate, which was about 1010 before Leiman Brothers collapsed in 2008. Since then, the exchange rate got as high as 1600 Won/Dollar but has since dropped to level more comparable with the value before 2008. Author Cho Jin-seo gives several key drivers to this movement including a low interest rate in the
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