Burger Index

Would like to share the Big Mac Index. Click on the image to see the full size, then use it to benchmark your cost. This is good of you travel a lot or if your job requires a benchmarking work. (courtesy of Economist + Wiki)

Purchasing Power Parity (PPP): is a measure of the relative purchasing power of different currencies. It is measured by the price of the same goods in different countries, translated by the FX rate (or exchange rate) of that country’s currency against a “base currency”.

How to read this table:
In this case, the goods is the Big Mac. For example, if a BigMac costs €3.06 in the countries that use Euro and costs $3.41 in US, then the PPP exchange rate would be 3.06/3.41 = 0.8973.
If the actual exchange rate is lower, then the BigMac theory says that you should expect the value of the Euro to go up until it reaches the PPP exchange rate. If the actual exchange rate is higher, then the BigMac theory says that you should expect the value of the Euro to go down until it reaches the PPP exchange rate.

The Over/Under valuation against the dollar is calculated as:

(PPP – Exchange Rate)
———————————- x 100
Exchange Rate