Check out the CHF - way too strong according to the Economist's Big Mac index
- Big Mac Index invented by The Economist in 1986
- Based on the theory of purchasing-power parity (PPP) ... (that in the long run exchange rates should move towards the rate that would equalise the prices of an identical basket of goods and services (in this case, a burger) in any two countries)
- For example, the average price of a Big Mac in America in January 2017 was $5.06; in China it was only $2.83 at market exchange rates. So the "raw" Big Mac index says that the yuan was undervalued by 44% at that time ... "signals where exchange rates should be heading in the long run ... but it says little about today's equilibrium rate"
- Burgernomics is not meant to be a precise gauge of currency misalignment
- The Economist says the Big Mac index has become a global standard, included in several economic textbooks and the subject of at least 20 academic studies
(ps. there is also an adjusted index addresses to address "the criticism that you would expect average burger prices to be cheaper in poor countries than in rich ones because labour costs are lower")
