I would like to know what the Bigmac index is.
Explanation from Alloprof
This Explanation was submitted by a member of the Alloprof team.
The Bigmac index serves as a benchmark for economists.
It is used in order to see if a currency is undervalued or overvalued against another currency. For example, if the price of a Bigmac in Canada (expressed in US dollars) is higher than the price of a Bigmac in another country (also expressed in US dollars), we say that the currency of this country is undervalued against the Canadian dollar.
Bigmac is used as a reference since in all countries it has the same components / ingredients. It should therefore be worth the same price. This is called the purchasing power parity theory.
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