Currency Valuation and Purchasing Power Parity
Jamal Ibrahim Haidar
April 1, 2011
World Economics, Vol. 12, No. 3, 2011
This paper aims to highlight key limitations of “The Economist” magazine’s Big Mac Index (BMI). The Economist markets the BMI as a tool to determine valuation of currencies. This paper shows that the BMI is a misleading measure of currency valuation for economies whose markets are structurally different from the benchmark currency countries.
Number of Pages in PDF File: 13
Keywords: Big Mac Index, currency valuation, purchasing power parity, international and regional price differences, border effect, brand perception
JEL Classification: E2, E3, F1, F2, F3, F4, F15, F23, F41
Date posted: June 15, 2011 ; Last revised: December 31, 2011
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