The hryvnia appreciates by 48.4% according to the "Big Mac index" report from The Economist
The Ukrainian hryvnia ranks eighth from the bottom in the list of undervalued world currencies, according to with an updated "Big Mac Index" published throughout the year by The Economist magazine.
According to the publication, a Big Mac in Ukraine costs 110 hryvnias, while in the USA it costs $5.69. Thus, the rate of the Ukrainian currency is undervalued by 48.4% compared to the actual exchange rate of UAH 37.44/$, and the rate, taking into account purchasing power, should be at the level of UAH 19.33/$.
- The most undervalued currencies of the world: monetary units of Taiwan, Indonesia, India, South Africa, Egypt, Malaysia and the Philippines.
- Instead, the Swiss franc (by 43.5%), the Norwegian krone (by 25.5%), the Uruguayan peso (by 23.7%), the Argentine peso (by 7.4%) , the euro (by 3.1%), the Swedish krona (by 3.1%), the Costa Rican colon (by 0.4%), the British pound (by 0.4%) are overvalued currencies.
In July 2022, the hryvnia to dollar exchange rate was not reflected in the "Big Mac index" due to the temporary closure of McDonald's restaurants due to the Russian invasion. In the fall of 2022, restaurants began to resume work in Ukraine.
In January of last year, the hryvnia was undervalued by 53.5%, in January 2022 this indicator was 51.7%, and at the beginning of 2021 - 54.9%.
What does the "Big Mac index" mean?
The Big Mac Index was created by The Economist in 1986. This is an unofficial index used to compare the purchasing power of different currencies. The index is intended to demonstrate the theory of purchasing power parity, which states that exchange rates should ensure the same value of the same basket of goods and services (in this case, a hamburger) in different countries in the long run.
"Burgeronomics" is not an accurate method of measuring currency undervaluation, but it helps to understand the theory of exchange rates. The "Big Mac Index" has become a global standard and has been included in several economics textbooks and is also the subject of academic research.
It is worth noting that there are many other methods of evaluating the purchasing power of currencies that can give different results.
Answers to questions
What is the hryvnia undervaluation rating according to the Big Mac index?
According to the Big Mac index from The Economist, the Ukrainian hryvnia ranks eighth from the bottom in the list of undervalued world currencies. According to this index, the Ukrainian currency is undervalued by 48.4% compared to the actual exchange rate and by 19.33% in terms of purchasing power.
Which currencies are the most undervalued and overvalued according to the Big Mac Index?
According to the Big Mac index, the most undervalued currencies in the world are the currencies of Taiwan, Indonesia, India, South Africa, Egypt, Malaysia and the Philippines. On the other hand, the overvalued currencies are the Swiss franc, the Norwegian krone, the Uruguayan peso, the Argentine peso, the euro, the Swedish krone, the Costa Rican colon and the British pound.
How does the "Big Mac Index" work and what is its role in measuring currency undervaluation?
The Big Mac Index was developed by The Economist in 1986 and is used to compare the purchasing power of different currencies. The index is based on the theory of purchasing power parity, which states that exchange rates should be such that the same basket of goods and services cost the same in different countries. The "Big Mac Index" is one method for evaluating the purchasing power of currencies, although there are other methods with different results.
More information
- hryvnia - the currency of Ukraine
- "Big Mac index" - an unofficial index used to compare the purchasing power of currencies
- The Economist - a publication that publishes the Big Mac index
- Taiwan is the country whose currency is the most undervalued according to the Big Mac index
- Malaysia is the country whose currency is the most undervalued according to the Big Mac index
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Discussion of the topic – The hryvnia is undervalued by 48.4%: interpretation of data from the "Big Mac index" from The Economist
Data from the updated "Big Mac index" from The Economist show that the Ukrainian hryvnia is undervalued by 48.4%. Discover the details and analysis of this phenomenon.
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