The Big Mac index was created by The Economist magazine as an informal way of measuring the purchasing power parity between different countries and currencies. The idea is that in every country, the Big Mac sold at McDonald’s is the same. The price of the Big Mac should reflect the local price of ingredients, wages and other expenses like advertising. Therefore, even though the Big Mac sandwich is the same in every country, its price differs. Many people use the Big Mac index to roughly gauge the relative strength of foreign exchange rates. But does this price index also reflect a country’s inflationary pressures? In ... (full story)