Cologne, May 27 dpa - The
U.S. dollar is undervalued against the Deutsch-mark based on how many "Big Mac"
hamburger sandwiches the two currencies can purchase, said one of Germany's
leading institutes.
The Institute of the German Economy (IW) in Cologne noted that the popular
sandwich by the McDonald's restaurant chain is increasingly being used by
economists around the world as a measure of currencies' relative purchasing
power.
The institute said that currency exchange rates are often unreliable as an
instrument to measure purchasing power. At the same time, "baskets" of products
used to arrive at comparative purchasing power are complicated to compile.
A simple alternative, now that McDonald's has spread to virtually every country
on earth, has become to look at what a Big Mac costs, the IW said.
"A particularly hungry American can buy five Big Macs for 11 dollars. If he
exchanged the money into Deutsch-marks, his 18 marks in Germany can just barely
obtain four Big Macs," the IW said.
Conclusion: based on the Big Mac index, the dollar is undervalued, the institute
said.
Americans can get their best Big Mac buy these days in Moscow, where one
sandwich costs only about 59 cents.
But Russians must "work nearly two days in order to afford this meaty capitalist
achievement - longer than people in any other country", the IW said. |
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