Burgernomics
By Randell Tiongson on August 22nd, 2009Ever heard the term ‘Burgernomics’? Believe it or not, there’s actually such a term and it’s widely used by economists/investors.
The publication The Economist actually publishes an index that makes reference to the Big Mac PPP. Err, the Big Mac what? PPP is short for Purchase Power Parity. PPP is a theory that states that currencies adjust according to changes in their purchasing power. It is actually survey done by The Economist that determines what a country’s exchange rate would have to be for a Big Mac in that country to cost the same as it does in the United States. They use the price of the Big Macs in different countries and divide it by the price of a Big Mac in the US. Let’s say that the price of a Big Mac in the Philippines is P100 and the price of a Big Mac in the US is US $ 3 — you simple divide the Philippine Big Mac cost by the US Big Mac cost, or 100 divided by 3. In this case, according to the Big Mac PPP, the exchange rate of the Philippine Peso against the US Dollars should be only P33.33: US$1, making our Peso undervalued.
Sometimes, Burgernomics makes some sense to me… but most of the time it just makes me hungry.
Hahaha.. I like the last comment..
I also read another dimension in measuring a country’s purchasing power by using labor hours spent to buy 1 bigmac. Thads Bentulan made an analysis in his article series in Businessworld way back 2005 entitled “Hyperwage Theory”, which may contradict or compliment the burgernomics.
http://streetstrategist.googlepages.com/hyperwagetheorybook
I’ll send you an email of his book. Its 277 pages but worth reading. You’ll definitely love it. Guaranteed.
Economics…. mind-boggling!
p.s. those who want a copy, just send me an email to [email protected]
What is Hyperwage Theory?
The Big Mac index is a global standard that can determine the purchasing power between countries by comparing the cost of a McDonald’s Big Mac around the world.