Currency Valuation and Purchasing Power Parity

Haidar, Jamal

doi:10.2139/ssrn.1864343

Abstract

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Currency Valuation and Purchasing Power Parity

Jamal Ibrahim Haidar

World Bank

April 1, 2011

World Economics, Vol. 12, No. 3, 2011

Abstract:
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

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Date posted: June 15, 2011 ; Last revised: December 31, 2011

Suggested Citation

Haidar, Jamal Ibrahim , Currency Valuation and Purchasing Power Parity (April 1, 2011). World Economics, Vol. 12, No. 3, 2011. Available at SSRN: http://ssrn.com/abstract=1864343 or http://dx.doi.org/10.2139/ssrn.1864343

Contact Information

Jamal Ibrahim Haidar (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States