Tuesday, May 30, 2006

Big Mac index

The Economist announces the 20th anniversary of its famous Big Mac Index, expressing the relative over- or undervaluation of currencies by reference to the price in local currency of a certain US fast food chain's flagship product. While the Economist claims that "burgernomics has an impressive record in predicting exchange rates", it doesn't offer any statistical proof, unfortunately. It is nonetheless interesting to note that the Swiss Franc is significantly overvalued (+68%) relative to the USD, beaten only by Iceland & Norway, where special explanations will likely apply. The Franc's overvaluation is still significant if compared with the EUR zone (+22%), Sweden (46%), Denmark (+54%), Britain (+18%). Time to put that unused foreign currency allocation to work?

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