About the Big Mac Index
A lighthearted guide to purchasing power parity
What is the Big Mac Index?
The Big Mac Index was invented by The Economist in 1986 as a lighthearted guide to whether currencies are at their "correct" level. It is based on the theory of purchasing-power parity (PPP), the notion that in the long run exchange rates should move towards the rate that would equalize the prices of an identical basket of goods and services (in this case, a Big Mac) in any two countries.
The burger was chosen because it is available in about 120 countries around the world. The Big Mac is a standardized product made in each country with similar ingredients, making it an ideal candidate for comparing prices across borders.
How Does It Work?
The Big Mac Index compares the price of McDonald's flagship burger across different countries. By converting local prices to US dollars at current exchange rates, we can see which currencies are overvalued or undervalued against the dollar.
The PPP Exchange Rate:
PPP Rate = Local Big Mac Price / US Big Mac Price If this differs from the actual exchange rate, the currency is considered over- or under-valued.
About This Website
BigMacIndex.app is an independent project that provides daily-updated Big Mac prices using the latest exchange rates. We source our data from The Economist's official Big Mac Index and update currency conversions daily using Tokyo FX Market rates.
Our goal is to make this data more accessible and interactive, allowing users to:
- Compare prices across multiple countries
- View historical price trends
- Change the base country for comparisons
- Download data for research purposes
Limitations
While the Big Mac Index is a useful tool, it has several limitations:
- Big Macs may not be perfectly comparable across countries due to local tastes and ingredients
- The index doesn't account for differences in labor costs, taxes, or profit margins
- McDonald's pricing strategies may vary by market
- Some countries don't have McDonald's restaurants
The index should be seen as a fun and accessible way to understand exchange rate theory, not as a definitive measure of currency valuation.
Data Sources
- Big Mac Prices: The Economist
- Exchange Rates: Tokyo FX Market (daily)
- Historical Data: TheEconomist/big-mac-data on GitHub
Methodology
Our data pipeline works as follows:
- Big Mac Prices: Sourced from The Economist's official Big Mac Index publication, typically updated twice per year (January and July)
- Exchange Rates: Updated daily using Tokyo FX market midday rates
- Calculation: USD prices recalculated using current exchange rates
- Publication: Data processed and published to our platform automatically
Calculation Method
For each country, we calculate:
USD Price = Local Price ÷ Exchange Rate
PPP Rate = Local Price ÷ US Price
Valuation = (PPP Rate - Market Rate) ÷ Market Rate × 100
Example (Japan):
- Local Price: ¥480
- Exchange Rate: ¥152.38/$
- USD Price: ¥480 ÷ 152.38 = $3.15
- US Price: $5.79
- Implied PPP: ¥480 ÷ $5.79 = ¥82.90/$
- Valuation: (82.90 - 152.38) ÷ 152.38 = -46% (undervalued)
Update Frequency
| Data Type | Frequency | Source |
|---|---|---|
| Big Mac local prices | Twice yearly | The Economist |
| Exchange rates | Daily (06:00 UTC) | Tokyo FX Market |
| USD prices | Daily | Calculated |
Academic References
- Pakko, M. R., & Pollard, P. S. (2003). "Burgernomics: A Big Mac Guide to Purchasing Power Parity." Federal Reserve Bank of St. Louis Review.
- Clements, K. W., Lan, Y., & Seah, S. P. (2012). "The Big Mac Index Two Decades On." Economics Letters.
"The Big Mac Index was never intended to be a precise gauge of currency misalignment, merely a tool to make exchange-rate theory more digestible." — The Economist