Are hamburgers harmless?:the Big Mac Index in the twenty-first century

Soo, Kwok Tong (2016) Are hamburgers harmless?:the Big Mac Index in the twenty-first century. Working Paper. Lancaster University, Department of Economics, Lancaster.

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Abstract

We make use of The Economist’s Big Mac Index (BMI) to investigate the Law of One Price (LOP) and whether the BMI can be used to predict future exchange rate and price changes. Deviations from Big Mac parity decay quickly, in approximately 1 year. The BMI is a better predictor of relative price changes than of exchange rate changes, and performs best when predicting a depreciation of a currency relative to the US dollar. Convergence to Big Mac parity occurs more rapidly for currencies with some form of exchange rate control than for freely floating exchange rates, which is the opposite of what we obtain using the aggregate CPI.

Item Type:
Monograph (Working Paper)
Subjects:
ID Code:
81488
Deposited By:
Deposited On:
16 Sep 2016 13:46
Refereed?:
No
Published?:
Published
Last Modified:
23 Sep 2020 23:50