A simple product offers insight into the complicated world of currencies and their purchasing power

The ubiquitous Big Mac: cheapest in Jakarta, most expensive in Basel.

Happy Birthday to The Economist's Big Mac Index, which turns forty this summer. In this era of deglobalization, trade imbalances and tariffs, forex manipulation and geopolitical realignment, an impartial analysis of a currency's real value is more important than ever.

In terms of U.S. economic policy, the centrality of the dollar's DXY value against other currencies has been emphasized by President Donald Trump: "If you look at China and Japan, I used to fight like hell with them, because they always wanted to devalue," he said.

What The Economist's Big Mac Index demonstrates right now, in the most general terms, is that Asian currencies are cheap against the dollar while the euro (EURUSD), sterling (GBPUSD) and the Swiss franc (USDCHF) in particular, are expensive.

The original notion of the index came to its author, Pam Woodall, in a "bathtub moment" in 1986: the value of a currency should reflect its purchasing power and the best way to assess this was to use one "perfect universal commodity" - the Big Mac. Woodall still works at the Economist as the Asian editor, but the commemorative article published in the August issue was penned by Simon Cox.

Whether one loves them or loathes them, the ubiquitous Big Mac burger is pretty much identical the whole world over. It contains the same sixty ingredients - from beef to xanthan gum - but of course the inputs, such as property rates of labor costs, vary widely from country to country.

Imitators have come and gone. Economists attempted something similar with a Starbuck's $(SBUX)$ latte, Apple's $(AAPL)$ iPhone and even Ikea's Billy Shelving units, but it's the Big Mac Index that has staying power.

Four decades on, Woodall's idea has now become a standard measure of purchasing power parity (the real buying power of a currency), and it tells us that the world's most expensive burger is currently being flipped on a Swiss grill at the equivalent of $9.04, while the cheapest is on offer in Indonesia at $2.38.

Burgers are pricier in Europe than they are in Asia

The second cheapest burger globally is the Taiwanese offering at $2.42 and only recently undercut by the decline in the Indonesian rupiah (USDIDR). It can be safely stated, as author Simon Cox did in a piece published July 30, that the Swiss Franc is overvalued and the Taiwanese dollar (USDTWD) is undervalued.

"But what can't be inferred from the index is the future value of those currencies," added Cox in a video interview from his base in Hong Kong.

Yes, Cox argues, it may give some indication of the direction of travel but "the predictive qualities of the Big Mac Index are decidedly hit and miss." Some misalignments suggested by the index have an air of permanence. Chances are, the Swiss franc will always be costly, Cox acknowledges.

However, the index had more success back in 1999, he notes, when the euro was being developed, the index did show that its introductory value was too expensive based on the cost of a Big Mac at the time. In due course, the euro corrected substantially.

What stands out to Cox from the latest instalment is the exaggerated weakness of the Chinese yuan (USDCNY), the Japanese yen (USDJPY) and Korean won (USDKRW). All of these countries run a significant trade surplus with the U.S., at least partially owing to the relative undervaluation. Cox found that one of the of the most surprising things about the 2026 comparisons was that a Big Mac in Japan is 20% cheaper than in China, as the yen has lost around half of its value since 2012.

There are some outliers: India, for example, a nation where beef is not generally eaten, serves no Big Mac so the equivalent is the Chicken Maharajah Mac. Russia's 'Bolshoi Mac' was taken out of the index after the Ukrainian war began in 2022 and McDonalds $(MCD)$ was forced to exit the country

And the most expensive Big Mac ever in terms of a nominal value? That dubious award would go to the Venezuelan Big Mac. In the hyperinflation of July 2021, sinking your gnashers into one of these would have set you back 16.02 million bolivares.

-Jules Rimmer