Video: Big Mac Index:

Can the price of a Big Mac around the world help compare and even predict the relative purchasing power of each currency?

As stated by Travelex, the creator of this video: “Twice a year The Economist publishes the Big Mac index. It is a fun guide to the world's currencies that attempts to adjust them all to an equitable level through the great equalizer known as the Big Mac.” Since the Big Mac can be purchased in essentially the same form in over 120 countries, it’s a good way to compare prices around the world, which helps to also estimate the relative “purchasing power” of each currency.

For example, per the January 5, 2020 currency comparison data published by The Economist, a Big Mac costs £3.39 in Britain and US$5.67 in the United States. The implied exchange rate is 0.60. The difference between this and the actual exchange rate on that day (01/05/2020), 0.77, indicates that the British pound is 22.2% undervalued, using the prices of Big Macs as the point of comparison. Remember that exchange rates are in constant flux, so one day’s currency comparison won’t be exactly the same most probably on another day.

It’s not an exact science but using the Big Mac Index does indicate that the citizens in certain nations can buy more or less for their money than others, which can help or hurt global businesses, domestic consumers and world travelers.

And one might assume that the Seattle Times could have their Business Staff writers develop a Starbucks Cappuccino Index...?