Big Mac Index & PPP Calculator

The Big Mac Index was invented by The Economist in 1986 as an informal way to measure purchasing power parity (PPP). It uses the price of a McDonald's Big Mac as a benchmark because it is sold in standardized form in many countries.

PPP is an economic theory comparing currencies through a basket of goods. The PPP exchange rate is the rate at which one currency must convert into another so equivalent goods can be purchased.

Currencies in countries where Big Macs are expensive relative to the US are typically overvalued. Switzerland, Norway, and Sweden often show overvaluations, while many emerging market currencies are undervalued.

Not exactly. The Big Mac Index is an informal indicator. Currency values are heavily influenced by capital flows, monetary policy, political risk, and interest rate differentials — none of which a single hamburger price can capture. Use it as a rough sanity check, not a definitive conclusion.

The Economist chose the Big Mac because it is produced locally in each country to a nearly identical standard. This makes it a reasonable — if imperfect — proxy for purchasing power. A single standardized product simplifies global comparison, though a full consumer basket would be more precise.