News, comments, discussions, information and analyses about the emerging Orient, that is, Asia Pacif, and especially China, and their most relevant economic and diplomatic developments. A space to follow the dynamics and the riches of an entire world, which was, in the past, the most developed region in the planet, and is prone to regain a renewed importance in world affairs.
Saturday, January 9, 2010
158) Chinaburguer undervalued
The Big Mac index
Taste and see
The Economist, January 6th 2010
Burgernomics shows the Chinese yuan is still undervalued
THE Big Mac index is based on the theory of purchasing-power parity (PPP)—exchange rates should equalise the price of a basket of goods in different countries. The exchange rate that leaves a Big Mac costing the same in dollars everywhere is our fair-value benchmark. So our light-hearted index shows which countries the foreign-exchange market has blessed with a cheap currency, and which has it burdened with a dear one. The most overvalued currency against the dollar is the Norwegian kroner, which is 96% above its PPP rate. In Oslo you can expect to pay around $7 for a Big Mac. At the other end of the scale is the Chinese yuan, which is undervalued by 49%. The euro comes in at 35% over its PPP rate, a little higher than half a year ago.
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