BIG MAC INDEX
Purchasing Power Parity measured in hamburgers. Invented by The Economist in 1986, the Big Mac Index uses the price of a McDonald's Big Mac as a benchmark to determine whether currencies are at their "correct" level.
Full Comparison Table
Why Big Macs?
The Big Mac is the perfect economic benchmark because it's a standardized product sold in nearly identical form across 100+ countries. Same two all-beef patties, same special sauce, same sesame seed bun — from Zurich to Shanghai.
Its price captures a complex basket of inputs: beef, bread, lettuce, cheese, labor, rent, electricity, packaging, logistics, and corporate margin. When you buy a Big Mac, you're implicitly purchasing a slice of the local economy.
The Economist invented this index in 1986 as a lighthearted way to explain purchasing power parity — the theory that exchange rates should eventually adjust so that identical goods cost the same everywhere. Four decades later, it remains one of the most-cited economic indicators in the world.
What the numbers tell us
- 01 If a Big Mac costs more in a country than in the US, PPP theory suggests that country's currency is overvalued
- 02 If it costs less, the currency may be undervalued — but this could also reflect lower wages and costs
- 03 Persistent undervaluation (like China's yuan) often indicates deliberate currency management
- 04 The index has correctly predicted long-term currency movements in several notable cases, including the euro's decline from its 2008 peak
Methodology
Raw Index
The raw index compares the cost of a Big Mac in each country (converted to USD at market exchange rates) against the U.S. price. The implied PPP rate is simply: local Big Mac price / U.S. Big Mac price. The difference between this implied rate and the actual exchange rate gives the over/under valuation.
GDP-Adjusted Index
The raw index has a known bias: Big Macs are naturally cheaper in poorer countries because labor costs are lower. The GDP-adjusted version accounts for this by regressing Big Mac prices against GDP per capita, producing a more meaningful valuation metric for developing economies.
Limitations
Not all Big Macs are created equal. Local tastes, taxes, import duties on beef, franchise agreements, and competitive dynamics all affect pricing. India uses chicken (the Maharaja Mac) instead of beef. Some countries have only a few McDonald's locations, making prices less representative.
Data Sources
Exchange rates use daily central-bank reference rates from the ECB feed, with Frankfurter as a fallback. Local Big Mac prices are stored reference values and may differ from current restaurant prices. The rate date appears below.