Clements, Kenneth W.; Lan, Yihui; Seah, Shi Pei - Department of Economics, Business School - 2007
The Big Mac Index, introduced by The Economist magazine 21 years 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...