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Big Mac index shows Ruble is still undervalued
February 7, 2013, 12:35 pm

[Getty Images]

The Big Mac index was introduced by The Economist in 1986. [Getty Images]

According to the Big Mac index the ruble is the fifth most undervalued currency worldwide.

The Russian ruble is undervalued by 44.5 per cent.

However, the situation has slightly improved – in the summer of 2012 the ruble was underpriced by 53 per cent.

The leader is the Indian rupee, undervalued by 62 per cent and South African rand comes second – undervalued by 50 per cent.

The Big Mac index uses the purchasing power parity and assesses the price of a McDonald’s Big Mac across countries.

Since the McDonalds’ burger should be the same in all the corners of the planet, the price is should in theory be the same too.

Thus the price of Big Mac becomes a barometer of what foreign exchange rates should be like.

So in Russia, a Big Mac costs $2.43 (73 rubles), compared with an average price of $4.37 in the US.

Therefore the “real” price of a dollar should be 16.69 rubles while it is actually 30.5 rubles.

Among other currencies that are too cheap relative to the dollar is the Chinese yuan (undervalued by 41.1 per cent), and the Ukrainian grivna (46.6 per cent).

At the same time Norway, Switzerland and Brazil boast the most overpriced currencies.

In Norway a Bic Mac amounts to $7.84, in Switzerland it is $7.12 and in Brazil – $5.64.

The Swiss franc managed to halt the appreciation and dropped from first position.

And the euro is overvalued by 11.7 per cent against the dollar.

The Big Mac index also shows that the greenback is priced quite fairly.

Daria Chernyshova

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