Our Big Mac index shows how burger prices differ across borders

The massive mac index was invented by The Economist in 1986 as a lighthearted information as to if currencies are at their “appropriate” degree. It’s based mostly on the speculation of purchasing-power parity (PPP), the notion that in the long term trade charges ought to transfer in direction of the speed that may equalise the costs of an similar basket of products and companies (on this case, a burger) in any two international locations.

Burgernomics was by no means supposed as a exact gauge of foreign money misalignment, merely a device to make exchange-rate concept extra digestible. But the Large Mac index has turn into a worldwide normal, included in a number of financial textbooks and the topic of dozens of educational research. For many who take their quick meals extra critically, we additionally calculate a gourmand model of the index.

The GDP-adjusted index addresses the criticism that you’d count on common burger costs to be cheaper in poor international locations than in wealthy ones as a result of labour prices are decrease. PPP alerts the place trade charges must be heading in the long term, as a rustic like China will get richer, nevertheless it says little about at present’s equilibrium fee. The connection between costs and GDP per particular person could also be a greater information to the present truthful worth of a foreign money.

In July 2022 we up to date the Large Mac index to make use of a McDonalds-provided worth for the USA. We additionally modified our methodology for the way we calculate the GDP-adjusted index, the total historical past of which is able to now be adjusted at any time when the IMF’s historic GDP sequence are up to date. The beforehand printed variations of each indices can be found in our archive.

Learn extra concerning the Large Mac index in “What Donald Trump can learn from the Big Mac index”. You too can obtain the information or learn the methodology behind the Large Mac index here.

Notice: The GDP-adjusted index was up to date in January 2021 to incorporate extra international locations.

Correction (January twenty sixth 2023): An earlier model of the index had the flawed Large Mac worth for China in January 2024. Sorry.