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What does the Big Mac index of the Argentine peso say: is it among the most devalued or not?

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What does the Big Mac index of the Argentine peso say: is it among the most devalued or not?

What the Big Mac Index reveals.

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The blue dollar and financiers above $ 300 fuel the fantasy that the Argentine peso is the most devalued currency, yet it is not. According to the Big Mac index compiled by The Economist, the Argentine peso is “devalued” and the wholesale dollar would have to be worth $ 114.56 for a burger to cost the same as in the US.

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According to the report, the Argentine currency is not among the countries with the greatest devaluation. In first place is the Venezuelan bolívar with a loss of 65.8% of purchasing power, followed by the South African rad, with a decrease of 54.5%. In third place was the Hong Kong dollar with a devaluation of 48.10%.

The list goes on and the Argentine peso has not yet appeared: the Japanese yuan is down by 45.10% and the Guatemalan quetzal by 34.7%. Mexican pesos, 33.4%, and Colombian pesos, 32.4%. South Korea, China and Peru complete the top 10 ranking with writedowns of 32%, 30.9% and 30.7% respectively.

The Argentine peso appears in position 40, also behind Brazil, which according to the Big Mac ranking its currency devalued by 17.5% and by 11.3% there was the loss of purchasing power of the Argentine currency.

According to the index drawn up by the weekly The Economistthe dollar should be worth $ 114.56 in Argentina to match the price of the famous hamburger in the United States. According to the publication, the local currency is also “devalued”.

According to his suggestion, a Big Mac costs 590 pesos in Argentina and US $ 5.15 in the United States. The implied exchange rate is $ 114.56. The difference between this and the real exchange rate, $ 129.12, suggests that the Argentine peso is undervalued by 11.3%.

If you compare the price of the famous burger with the blue dollar value at $ 337, buying the combo at McDonald’s is even more affordable since costs $ 1.75.

According to the Big Mac Index, the currencies of almost all Latin American countries are undervalued against the dollar, except for Uruguay, which has the most expensive burger, paying an average of US $ 6.09.

Argentina was ranked in 14th place among the countries of the world that were part of the sample and at regional level in fourth place, behind Uruguay (6.6%), Venezuela (12.9%) and Brazil (25.8 %).

The Big Mac Index was invented by The Economist in 1986 as a guide to knowledge if the coins are at their “correct” level.. It is based on the theory of purchasing power parity (PPP), the idea that, in the long run, exchange rates should move towards the rate that would equal the prices of an identical basket of goods and services (in this case, a hamburger ). in any two countries.

“Burgernomics was never intended as an accurate indicator of monetary mismatch, merely a tool for making exchange rate theory more digestible. However, the Big Mac Index has become a global standard, included in several economic textbooks and the subject of dozens of academic studies, “pointed out by The Economist.

YN

Source: Clarin

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