The Big Mac Index (the economic BMI) is your quick thumb-suck measure of just how healthy (or unhealthy) a currency is looking. Basically, it makes the assumption that Big Macs should cost roughly the same everywhere – and where there are differences, that’s indicative of a currency’s relative strength or weakness.
The problem, of course, as with any rule of thumb, is that it ignores things like:
- Different demands for Big Macs
- Different supplies of ingredients
- Different costs of living caused by trade walls and immigration barriers
Essentially, there are structural reasons why things cost less in developing countries and more in developed ones. I wrote about it in an older post: Why Bus Drivers In Sweden Earn More Than Bus Drivers In India.
But then the Economist (who prepares the index) went ahead and adjusted for different costs of labour. So there are now there are two varieties of index.
Here’s an Infographic Introduction
Which just about covers it.
Here are the updated Raw and Adjusted Indices for July 2016
The Raw Index:
The Adjusted Index:
And South Africa?
The South Africa specific raw numbers:
The South Africa specific adjusted ones:
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