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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