What is the Big Mac Index? – Webtekno

by The Economist The Big Mac Index, introduced in September 1986, is used to compare the values ​​of currencies in different countries. Whether currencies are at the “right” level The basis of the Big Mac Index, which is used to determine the price, is based on purchasing power parity.

hamburger economics Although this theory, also known as McDonald’s iconic hamburger Big Mac, was originally designed to make the exchange rate theory more understandable and entertaining, it even managed to find a place in textbooks later on. The Economics updates the Big Mac Index twice a year.

First of all, let’s see what purchasing power parity is.

Exchange rates based on purchasing power parity are the prices that an exchange rate can buy. according to the value of the product is being determined. In other words, we can also say that the ratio of prices of a basket of goods or services (in our context, this will be a Big Mac) in different countries.

In other words, thanks to this parity, differences in price levels between different countries are eliminated and Prices can be compared on a product-by-product basis without being dependent on exchange rates..

So how exactly does the Big Mac Index work?

Big Mac Index, in one country The price in dollars that must be paid to buy a Big Mac represents.

This index takes the price of a Big Mac sold in America as a basis and compares the price of a Big Mac in other countries. in terms of price in America calculating.

If the result is more than the price in America, the exchange rate overvalued (overvalued), if it is lower than the US price undervalued It is described as (undervalued).

To summarize, the Big Mac index is calculated by comparing the price of a Big Mac in America with its sales prices in other countries. “Big Mac dry” is calculated and this rate is compared with the real exchange rate to determine whether it is below or above the real value.

Let’s see which countries eat the most expensive Big Mac.

According to the research conducted by The Economist in July 2023; respectively SwitzerlandNorway, Uruguay, Argentina, European Union countries, Sweden and Denmark were described as the countries selling the most expensive Big Mac.

So, in which countries is the cheapest Big Mac?

The cheapest Big Mac is in order: TaiwanIndonesia, India, Egypt, South Africa, Philippines and Ukraine are purchasing.

Let’s take a look at what Turkey’s Big Mac Index is like in July 2023, according to The Economist.

According to data, there was a Big Mac in our country in July this year. when it was 95 liraIn America, where we base the prices, it is 5.58 dollars.

If we look at the exchange rates, in July 2023 1 Turkish lira to 26.93 dollars It corresponds.

When we compare Big Mac prices, the exchange rate (95/5.58) 17.03 We see it coming out. Well well below market value We buy a Big Mac with an exchange rate.

However, if we wanted to calculate the Turkish lira price of a Big Mac by multiplying the sales price in America (5.58) with the exchange rate (26.93), 150.26 TL We would reach a result like this.

As a result, in the light of these calculations, one Big Mac sold for 95 lira in our country 36.8% of the required value We see that it is below.

So how is the situation now?

One Big Mac on McDonald’s website on September 28, 2023 110 TL.

As for the American Big Mac, since there is not as high inflation in America as in our country, the price in July 2023 is $5.58 Let’s take it as a basis.

Current dollar rate as of September 28, 2023 27.43 TL.

Now we move on to the calculation.

Based on international prices (110/5.58), the exchange rate shown by the Big Mac Index 19.71 TL.

The real dollar exchange rate in the market was 27.43 lira.

So, according to this calculation, Big Mac in September 2023 the value that should be 28.14% under We can say that it has gained value.

To put it simply, according to the Big Mac Index, the market value of the Turkish lira is below its deserved value against the US dollar. 28.14% less valuable we can say.