IDEAS home Printed from
   My bibliography  Save this paper

The Big Mac Index Two Decades On An Evaluation Of Burgernomics


  • Kenneth W Clements

    (UWA Business School, The University of Western Australia)

  • Yihui Lan

    (UWA Business School, The University of Western Australia)

  • Shi Pei Seah

    (UWA Business School, The University of Western Australia)


The Big Mac Index, introduced by The Economist magazine more than two decades ago, claims to provide the “true value” of a large number of currencies. This paper assesses the economic value of this index. We show that (i) the index suffers from a substantial bias; (ii) once the bias is allowed for, the index tracks exchange rates reasonably well over the medium to longer term in accordance with relative purchasing power parity theory; (iii) the index is at least as good as the industry standard, the random walk model, in predicting future currency values for all but shortterm horizons; and (iv) future nominal exchange rates are more responsive than prices to currency mispricing. While not perfect, at a cost of less than $US10 per year, the index seems to provide good value for money.

Suggested Citation

  • Kenneth W Clements & Yihui Lan & Shi Pei Seah, 2010. "The Big Mac Index Two Decades On An Evaluation Of Burgernomics," Economics Discussion / Working Papers 10-14, The University of Western Australia, Department of Economics.
  • Handle: RePEc:uwa:wpaper:10-14

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:


    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. How good is the Big Mac index?
      by Economic Logician in Economic Logic on 2010-10-01 19:21:00


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Pierdzioch, Christian & Schöber, Timo & Stadtmann, Georg, 2020. "The LoP game: BigMac versus Fortnite," Discussion Papers 417, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
    2. Long Hai Vo, 2021. "Understanding International Price and Consumption Disparities," Economics Discussion / Working Papers 21-01, The University of Western Australia, Department of Economics.
    3. O’Brien, Thomas J. & Ruiz de Vargas, Santiago, 2019. "Currency indexes and consistent currency misvaluation: Illustrations using Big Mac data," Research in International Business and Finance, Elsevier, vol. 48(C), pages 464-474.
    4. Perry Burnett & Travis Brooks & Patrick Bassett, 2017. "Estimating Quality of Life and Place with Location Theory: The McBucks Index," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 134(2), pages 455-472, November.
    5. Christoph Fuchs & Martijn G. de Jong & Martin Schreier, 2020. "Earmarking Donations to Charity: Cross-cultural Evidence on Its Appeal to Donors Across 25 Countries," Management Science, INFORMS, vol. 66(10), pages 4820-4842, October.
    6. Clements, Kenneth W. & Lan, Yihui, 2010. "A new approach to forecasting exchange rates," Journal of International Money and Finance, Elsevier, vol. 29(7), pages 1424-1437, November.
    7. Hai Long Vo & Duc Hong Vo, 2023. "The purchasing power parity and exchange‐rate economics half a century on," Journal of Economic Surveys, Wiley Blackwell, vol. 37(2), pages 446-479, April.
    8. Amita Majumder & Ranjan Ray, 2020. "National and subnational purchasing power parity: a review," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 47(2), pages 103-124, June.
    9. 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.
    10. Ken W. Clements & Jiawei Si & Long H. Vo, 2017. "Food And Agricultural Prices Across Countries And The Law Of One Price," Economics Discussion / Working Papers 17-04, The University of Western Australia, Department of Economics.
    11. Kenneth W Clements & Yihui Lan & Haiyan Liu & Long Vo, 2022. "The Icp, Ppp And Household Expenditure Patterns," Economics Discussion / Working Papers 22-18, The University of Western Australia, Department of Economics.
    12. Duc Hong Vo & Anh The Vo, 2017. "Currency evaluation using a big mac index for Thailand – lessons for Vietnam," Economics Bulletin, AccessEcon, vol. 37(2), pages 999-1011.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    This item is featured on the following reading lists, Wikipedia, or ReplicationWiki pages:
    1. Economic Logic blog


    Access and download statistics


    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:uwa:wpaper:10-14. 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: Sam Tang (email available below). General contact details of provider: .

    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.