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iPad Purchasing Parity: Farewell to the Big Mac Index

Author

Listed:
  • Sandeep Mazumder

    () (Wake Forest University)

Abstract

It has been 30 years since The Economist magazine launched its popular Big Mac index-a playful way to test the theory of purchasing power parity (PPP). In this light-hearted follow-up investigation on the use of a single product to test PPP, we present evidence that The Economist should now ditch Big Macs and instead turn to iPads. When using data on Apple's iPad tablet computer, we find that the international prices on this product conform much more closely to PPP than the Big Mac does. This is in turn driven by the tradable nature of iPads, unlike the Big Mac which is a perishable product. Thus it is time to bid farewell to the Big Mac index in its 30th year, and time to usher in an updated test of PPP, namely the iPad index.

Suggested Citation

  • Sandeep Mazumder, 2016. "iPad Purchasing Parity: Farewell to the Big Mac Index," Economics Bulletin, AccessEcon, vol. 36(4), pages 2128-2136.
  • Handle: RePEc:ebl:ecbull:eb-16-00619
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    File URL: http://www.accessecon.com/Pubs/EB/2016/Volume36/EB-16-V36-I4-P206.pdf
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    References listed on IDEAS

    as
    1. Robert E. Cumby, 1996. "Forecasting Exchange Rates and Relative Prices with the Hamburger Standard: Is What You Want What You Get With McParity?," NBER Working Papers 5675, National Bureau of Economic Research, Inc.
    2. Crucini, Mario J. & Landry, Anthony, 2019. "Accounting for real exchange rates using micro-data," Journal of International Money and Finance, Elsevier, vol. 91(C), pages 86-100.
    3. Anthony E. Landry, 2008. "The Big Mac: a global-to-local look at pricing," Economic Letter, Federal Reserve Bank of Dallas, vol. 3(sep).
    4. Yukinobu Kitamura & Hiroshi Fujiki, 2004. "The Big Mac Standard: A statistical Illustration," Economics Bulletin, AccessEcon, vol. 6(13), pages 1-18.
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    Cited by:

    1. Andreea-Daniela GANGONE & Mariana-Cristina GANESCU & Mihaela ASANDEI, 2018. "An Analysis Of The Effect Of Purchasing Power Parity On National Competitiveness And Human Development In 21 European Countries," Contemporary Economy Journal, Constantin Brancoveanu University, vol. 3(1), pages 152-165.

    More about this item

    Keywords

    Purchasing power parity; Big Mac index.;

    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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