A Big MacParity Guide to Undervalued Currencies

China is not high on the list for “day one sanctions” if one were to look at this fast-food data.


Figure 1: Log relative dollar price of Big Mac against dollar price of US Big Mac (July 2016) versus log relative per capita income in PPP terms (2016 estimates); regression fit from quadratic specification (black dots), and 90% prediction interval (gray dots). Source: Economist, World Bank World Development Indicators, and author’s calculations. Data [XLSX]

Using the methodology outlined in this post, it’s clear that by the price criterion, Russia’s currency is much more undervalued (at 50% in log terms) than China’s.

4 thoughts on “A Big MacParity Guide to Undervalued Currencies

  1. 2slugbaits

    Menzie Well….maybe “the Donald” meant Taiwan when he referred to China’s undervalued currency. That might be his new version of a one-China policy. Could be. He really is that dumb.

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