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Budget busting burgers – Swiss franc still the most overvalued

Summary:
The Economist has just published its January 2018 Big Mac index, a light-hearted measure of whether currencies are under or overvalued. The underlying assumption is that a Big Mac is the same whether bought in Kiev or Chur, so any price difference must be due to the exchange rate. © Sergiomonti _ Dreamstime.com - Click to enlarge In January 2018, Swiss Big Macs were still the world’s most expensive, making the Swiss franc the most overvalued currency, 28.1% higher than it should be. The implied exchange rate is 1.23 Swiss francs to 1 US dollar. A key criticism of the index is that it ignores wage differences. To correct for this the Economist has an adjusted index, which factors in GDP per capita. After this

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The Economist has just published its January 2018 Big Mac index, a light-hearted measure of whether currencies are under or overvalued. The underlying assumption is that a Big Mac is the same whether bought in Kiev or Chur, so any price difference must be due to the exchange rate.

McDonalds

© Sergiomonti _ Dreamstime.com - Click to enlarge

In January 2018, Swiss Big Macs were still the world’s most expensive, making the Swiss franc the most overvalued currency, 28.1% higher than it should be. The implied exchange rate is 1.23 Swiss francs to 1 US dollar.

A key criticism of the index is that it ignores wage differences. To correct for this the Economist has an adjusted index, which factors in GDP per capita. After this adjustment the Swiss franc is only 8.1% overvalued, pushing it down to the 11th most overvalued currency.

Wage adjustment aside, for the CHF 6.50 price of a Big Mac in Switzerland you could buy four in the Ukraine, the cheapest country on the list.

Given that one of these burgers contains around half the recommended daily fat intake, 10 grams of saturated fat and close to one gram of trans fat1, one is probably more than enough.


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