‘Burgernomics’ show Russian rouble still highly undervalued

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Published time: February 06, 2013 15:43
Edited time: February 06, 2013 19:43

Ruble and dollar banknotes. (RIA Novosti / Iliya Pitalev)

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Currencies, Economy, Russia and the global economy

The Economist has released its so-called Big Mac index where Russian rouble finds itself in the top ten of the world’s undervalued currencies.

The index is a heart lighted guide to alignment of world currencies in regard to the US dollar and is based on comparing price for a McDonald’s Big Mac in various countries. In January 2013 a burger in Russia cost $2.43 at market exchange rates, while in the United States the price was $4.37. So the “raw” Big Mac index shows that the rouble was undervalued by 44.5%. This means, the US dollar exchanges to the Russian rouble at 1/30.5 rate, while its actual rate should be 1/16.69, according to the index.

Indian rupee tops the list of world’s undervalued currencies, while the Venezuelan bolivar sits on the other end of the ranking as the most overvalued national currency. This year’s edition evaluates 45 national money units.

The Big Mac index was invented by the Economist in 1983. It’s based on purchasing-power parity which shows the direction where exchange rates should be heading in the long run. The index has become a global standard and is included in several economic textbooks, according to the Economist.

Comments (3)

Enrique (unregistered) 10.02.2013 03:17

Big-one, devaluation is good for exports. In fact, that is what S.Korea has done with the won for decades...

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AmericanInRomania (unregistered) 07.02.2013 12:15

Big-one5 (unregistered) wrote in #1
Same tactics employed to devalue Iran currency has been used against Russia. You need the tech to build your own codes and all...Never trust other countried with that. Then sueing S&P and other organizations like the U.S is doing because of the loss of AAA credit. Build a site at a national S.K to understandt economy, math and other sciences related to economy. Only way.
-------- Really?What sanctions is Russia under? None? So there goes your entire premise of your comment. Russia is part of the WTO and if Russia was a target of economic actions to weaken its currency artificially, Russia could take the offending nation to the WTO and get paid billions if found to be true.
XXXXPeople might think "Big Mac'onomics" is silly, but a number of economists have shown it might be a better indicator of currency value and inflation than current methods. You don't need a Big Mac though, anything that is exactly the same wherever it is sold will work. I always preferred a can of Coca-Cola.

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Big-one5 (unregistered) 06.02.2013 19:22

Same tactics employed to devalue Iran currency has been used against Russia. You need the tech to build your own codes and all...Never trust other countried with that. Then sueing S&P and other organizations like the U.S is doing because of the loss of AAA credit. Build a site at a national S.K to understandt economy, math and other sciences related to economy. Only way.

Undo