Currency Valuation and Purchasing Power Parity

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

13 Pages Posted: 15 Jun 2011 Last revised: 31 Dec 2011

Jamal Ibrahim Haidar

Harvard University

Date Written: April 1, 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.

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

Suggested Citation

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

Jamal Ibrahim Haidar (Contact Author)

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

HOME PAGE: http://scholar.harvard.edu/haidar

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