The latest findings from The Economist's Big Mac index:

  • Most overvalued is the Swiss franc
  • Most undervalued is the Russian rouble

Full article is here, may be gated

OK ... its not really my favourite pricing model ... but it's the tastiest!


The index is based on the idea of purchasing-power parity, which says exchange rates should move towards the level that would make the price of a basket of goods the same in different countries. Our basket contains just one item: a Big Mac hamburger. If the local cost of a Big Mac converted into dollars is above $4.79 (its price in America), a currency is dear; if it is below the benchmark, it is cheap.

  • Purchasing-power parity holds only in the long run
  • Over shorter periods, currencies are often pushed far away from such fair-value yardsticks by international capital flows, which in turn are driven by broader trends in the global economy
  • Exchange rates are currently being buffeted by the euro crisis, the growing likelihood of a rise in interest rates in America, China's slowing economy and the sharp drop in the oil price