Friday, October 1, 2010

How good is the Big Mac index?




1 comment:

vivaeastafrica said...

by vivaeastafrica
I just returned from a two-week visit to Egypt and as an economist did collect data on prices and wages to do up a poverty profile of the country. Like you I always thought the choice of the Big Mac as a predictor of exchange rates was bogus. For Egypt it shows the currency is undervalued - the Big Mac is cheaper in Cairo than the composite one in the USA. Why should it not?! The supervisour(sic; that way spelt on the ID badge)'s daily salary would purchase just 2 Big Macs, compared to 2 from an ordinary worker's hourly wage in the US. I stuck to falafel - the same number of calories as the Big Mac at one-tenth the price and twice the taste. Will write to the Economist.