Big Mac Index Currency Comparison: Rupiah Above Russian Ruble

The *Big Mac Index* is an index designed by *The Economist* to compare currency values between countries.

This index is based on the theory of purchasing-power parity (PPP), which assumes that the purchasing power of two currencies against a certain good should ideally be equivalent.

In this index, *The Economist* uses the price of a Big Mac in the United States (US) as a benchmark.

The Big Mac is chosen as an indicator because this burger is very popular at McDonald's outlets globally. Big Macs in various countries are also produced from the same basic ingredients such as meat, bread, cheese, lettuce, onions, and so on.

Swiss Franc Highest, Russian Ruble Lowest

Based on the *Big Mac Index* methodology, the currency whose value most exceeds the fair value or is *overvalued* out of the 57 surveyed countries is the Swiss franc.

In January 2022, the price of a Big Mac in Switzerland reached 6.5 francs, or US$7, while in the US it was US$5.81. Thus, the Swiss franc is considered *overvalued* by 20.2% against the US dollar.

Meanwhile, in this index, the Indonesian Rupiah is ranked 55th out of a total of 57 countries.

*The Economist* noted that in January 2022, the price of a Big Mac in Indonesia was Rp34,000, or US$2.37. This makes the Rupiah considered undervalued by 59.3% compared to the US dollar.

However, the Ruble is considered even lower. *The Economist* noted that the price of a Big Mac in Russia was 135 rubles or US$2, making it *undervalued* by 70% compared to the US dollar.

This figure also places the Russian Ruble at the bottom of the 57 countries surveyed in the *Big Mac Index*.

Nevertheless, *The Economist* acknowledges that this index cannot be used as an absolute benchmark.

"Burgernomics was never intended as a precise measure of currency misalignment, only a tool to make the theory of exchange rates easier to digest," they wrote on their official website.