Big Mac index

At least that's what the Big Mac index says.

And what about the Big Mac index?

It sounds a little wacky, but as a forecasting device the Big Mac index hasn't done badly.

Take, for instance, the Big Mac index, an idea introduced by The Economist magazine and that has caught on somewhat with practicing economists.

As usual, you mention a few concerns over the Big Mac index (April 17th), and I wonder if you should not have mentioned another one.

In 2007, an Australian bank's subsidiary, Commonwealth Securities, adapted the idea behind the Big Mac index to create an "iPod index."

The Big Mac index, an informal measure of purchasing power parity among world currencies, is universally acknowledged due to the same experience and knowledge of McDonald's.

In the Big Mac index, the basket in question is a single Big Mac burger as sold by the McDonald's fast food restaurant chain.

The working-time based Big Mac index might give a more realistic view of the purchasing power of the average worker, as it takes into account more factors, such as local wages.

The Economist proudly notes that during the last year, when eight major currencies rose or fell by at least 10 percent in value, the Big Mac index got the direction right for seven of them.

The Big Mac index was introduced in The Economist in September 1986 by Pam Woodall as a semi-humorous illustration and has been published by that paper annually since then.

The following table, based on data from The Economists January 2013 calculations, shows the under (-) and over (+) valuation of the local currency against the U.S. dollar in %, according to the Big Mac index.

UBS's "Prices and Earnings" Report 2006 Good report on purchasing power containing a Big Mac index as well as for staples such as bread and rice for 71 world cities.

Guillermo Moreno, Secretary of Commerce in the Kirchner government, reportedly forced McDonald's to sell the Big Mac at an artificially low price to manipulate the country's performance on the Big Mac index.

Being a firm believer in purchasing-power parity as a forecasting tool, I find the Big Mac index significantly more accurate than the myriad of economists' forecasts that spew forth from the profusion of banking and security-firm literature.

The Big Mac index uses the cost of a McDonald's Big Mac burger in various countries compared to its price in the United States to determine the relative price of each currency to the dollar.

UBS Wealth Management Research has expanded the idea of the Big Mac index to include the amount of time that an average worker in a given country must work to earn enough to buy a Big Mac.

THE latest version of The Economist's rough-and-ready guide to relative currency values, our annual Big Mac index, published in April, showed that the Hong Kong dollar was the currency most out of line with the American dollar.

Your Big Mac index, and William Burke's letter in the same issue about the yen-dollar exchange rate, brought to mind an explanation, which may be apocryphal, of how the exchange rate of 360 to $1 was arrived at during the occupation of Japan.