For a while now, The Economist
has published what it refers to as the Big Mac Index- a comparison of the cost (in a common currency) of a Big Mac in different countries in the world. This index is a good lesson in purchasing-power parity
, or, rather, the lack thereof, since the cost of a Big Mac differs considerably by country, even when normalizing for currency. The index also provides a good opportunity to think about real exchange rates
and what they represent.
This year, the Big Mac Index has gone high tech, and it has a bunch of fun interactive features that you can check out when you feel like getting your nerd on. Also, if you want to think more about the rationale behind purchasing-power parity, there is a great lesson to be learned from the case of Norwegian diapers. No, really.