Many people have tried a famous Big Mac at McDonald’s fast food restaurants at least once in their lives (even though it’s not quite healthy food).
This hamburger is probably the most famous in the product line of the American fast food industry. However, few people know that it gave rise to the so-called Big Mac Index, which is used to compare the value of currencies of different countries.
What is the Big Mac Index?
The Big Mac Index is the price of the burger in various countries that are converted to one currency (such as the US dollar) and used to measure purchasing power parity.
It all started in 1986 when The Economist magazine decided to estimate the currencies’ value by countries based on the prices of Big Mac at McDonald’s fast-food restaurants.
Thus, The Economist introduced a simple indicator of the fundamental value of currencies globally.
Why exactly was the Big Mac taken as an indicator?
The reason is very simple. Big Mac is the most well-known product in McDonalds’ fast-food chain. Besides, the same ingredients are used for Big Mac in any country: meat, bread, cheese, lettuce, onions, etc.
Therefore, The Economist experts use Big Mac alone instead of determining the cost of a consumer basket (more complex method) for each country.
Big Mac Index Table as of Q2 2020
The most relevant Big Mac Index so far (as of July 2020) is presented in the table below.