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BigMac index looks like nice idea but it is wildly off eventually. It's price converted to the common currency will vary by tens of percents, while actual purch
by Yizahi 6y ago
BigMac index looks like nice idea but it is wildly off eventually. It's price converted to the common currency will vary by tens of percents, while actual purchasing ability by country will vary by hundreds of percents or more. This index unfortunately fails at it's main and sole purpose.
In fact the majority of times BigMac index is mentioned in media is in the reverse calculation - assuming that BigMac price is more or less "fair" per country journalists calculate how actual salaries or prices in the country stray away from this indicator, to show severity of economic problems.
- sudhirj 6y agoSo pretty much all measures or indexes are inaccurate in that light. The reason I like it is that it takes a product that’s priced proportionally to local labour and commodities, is globally recognisable and serves as an easy frame of reference. For products and services that have near zero marginal costs. Saying something is worth 2 cups of coffee, for instance, is useful but our coffee prices might differ by an order of magnitude. But McD is always a middle class lunch wherever they run. The other alternative I can think of is Coca Cola. That would also be an interesting index.