IDEAS home Printed from https://ideas.repec.org/h/pal/palchp/978-0-230-51241-2_3.html
   My bibliography  Save this book chapter

The Economics of the Big Mac Standard

In: The Big Mac Index

Author

Listed:
  • Li Lian Ong

Abstract

In the course of purchasing power parity (PPP) research, much of the debate over validity has been over the choice of an appropriate ‘basket’ for making purchasing power comparisons. The different compositions of goods and services in these baskets across countries have resulted in arguments against their usefulness for PPP purposes. This problem is augmented by the existence of productivity differentials in traded and non-traded goods across countries. Therefore, we consider the use of the Big Mac hamburger as the international monetary standard as being a more palatable alternative. It is produced locally in over 80 countries around the world, with only minor changes in recipe, and thus has the flavour of the ‘perfect universal commodity’. Our results indicate that the Big Mac Index is surprisingly accurate in tracking exchange rates over the long-term, which is consistent with previous PPP research findings. We subsequently enhance our PPP comparisons by taking into account the productivity differentials between countries and excluding non-traded goods from the Big Mac Index to derive the No-Frills Index.

Suggested Citation

  • Li Lian Ong, 2003. "The Economics of the Big Mac Standard," Palgrave Macmillan Books, in: The Big Mac Index, chapter 3, pages 51-87, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-51241-2_3
    DOI: 10.1057/9780230512412_3
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:palchp:978-0-230-51241-2_3. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.