@techreport{9e2325e60ba5495ba6fbee77656cc0d4,
title = "The Big Mac Index Two Decades on an Evaluation of Burgernomics",
abstract = "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 short-term 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.",
author = "Kenneth Clements and Yihui Lan and Seah, {Shi Pei}",
year = "2010",
language = "English",
series = "Economics Discussion Papers",
publisher = "UWA Business School",
number = "14",
address = "Australia",
type = "WorkingPaper",
institution = "UWA Business School",
}