Big Mac Index: The Purchasing Power of the United States vs. Switzerland

The Big Mac Index
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The Big Mac Index is a system of determining whether the markets are undervalued or overvalued. This can be achieved by comparing the currencies worldwide with the common standards of Big Mac. The economists convert the national prices twice a year into U.S. dollars. Although the Big Mac is a standardized item worldwide, the relative cost in each country should also be the same. According to the 2022 Big Mac Index, currently, Switzerland possesses expensive Big Macs of about 6.98 U.S. dollars. Comparatively, the cost in the U.S. was 5.81 dollars, while the euro area had approximately 4.95 U.S. dollars.
Purchasing power parity (PPP) is a theory that economically compares the currencies of different countries using an approach of a “basket of goods” (Chen & Devereux 2003). PPP helps in comparing the ...