A look back over the index’s life is a reminder that across the span of four decades, currencies—and even countries—can come and go. The original article featured West Germany, which dropped the modifier in 1990. The Soviet Union made a brief appearance after McDonald’s opened a restaurant in Moscow’s Pushkin Square in January 1990. On its first day, it served the Bolshoi Mak and other marvels to over 30,000 people, some of whom had queued for six hours. “In Moscow,” we reported, “fast food comes slow.” The Soviet Union was replaced by Russia in the index of 1992. Then Russia itself disappeared from the menu 20 years later after its invasion of Ukraine prompted McDonald’s to depart. Yugoslavia dropped out of the index in 1991. It would have been nice if it had stuck around. Its novi dinar, introduced after many parts of the country had broken away, was given the three-letter currency code YUM. Even when countries remain intact, their currencies sometimes fall apart. The Big Mac index has provided grim snapshots of catastrophic losses of purchasing power. Back in 1986, for example, it took 2.5 cruzeiros to buy the burger in Brazil. By 1993 it required 77,000. The cruzeiro was retired shortly afterwards. Even those crazy prices were later surpassed in Venezuela. In July 2021 a Big Mac cost 16.02m Venezuelan bolívares, the highest number ever recorded in the index. With the benefit of hindsight, the early indices yield a particular surprise. In the first edition, we asked not whether other currencies were misaligned against the dollar, but whether the dollar was misaligned against them. That was revealing. The index first appeared a year after the Plaza Accord, a concerted effort by America, Britain, France, Germany and Japan to weaken the dollar, which was too strong for comfort. The article was followed a few months later by the Louvre Accord, in which the same countries (plus Canada) tried instead to stabilise the dollar, which had fallen too far too fast. The dollar, in other words, could not be taken for granted as the prime meridian against which other currencies should be judged. It was a problem that America and the rest of the world were trying to resolve.
Currencies are once again moving out of whack. According to the Big Mac index, the world price of burgers (converted into dollars, then averaged across countries, weighted by their GDP) moved closer to the American price in the first decade of this century. But since 2010 it has once again diverged (see chart 2). Recent editions of the index show that currency misalignments in either direction are at their widest since the mid-1990s (see chart 3). American inflation after 2021 is one culprit. The growing prominence of an undervalued Chinese yuan is another. A third contributor is the plunging yen. Incredibly, it is now about 20% cheaper to buy a Big Mac in Japan than in China. This story is broadly confirmed by the more sophisticated purchasing-power parities calculated by international financial institutions. According to the IMF, for example, the average dollar price of goods and services across countries (again, weighted by the size of their economies) was only 56% of the American price in 2025, the biggest gap in the past 40 years. The diminished global price may partly reflect the growing economic weight of emerging economies. These countries often look cheap on our index; rich countries tend to be expensive. One reason is productivity gaps within countries. In prosperous parts of the world, a critical mass of tradable industries is highly productive and can thus afford to pay workers high
wages. The generous pay bids up the wages of workers even in more sheltered, less productive bits of the economy. These trailing industries pass on the higher labour costs to customers in the form of higher prices. That makes rich countries expensive, relative to poorer ones, where both productivity and wages are low. To take account of this pattern, we introduced an alternative version of the index in 2011. Adjusted for GDP per person, it assesses whether a country’s currency is more undervalued than you would expect for an economy at its level of development. The Peruvian sol, for example, is 20% undervalued on our raw index, but about fair value on the adjusted version. No serious economist thinks currencies will ever move by enough to equalise dollar prices across all countries, rich and poor. But they should adjust enough to correct abnormally large misalignments. Recent studies suggest that floating exchange rates largely offset differences in inflation over a span of 5-6 years. Some currency traders might even be tempted to bet on this idea. But be warned, the predictive record of the Big Mac index is decidedly hit and miss. In 1996 Robert Cumby of Georgetown University tested the index’s predictive powers over the first decade of its existence. He pointed
out what is obvious to any faithful reader: many currencies remain overvalued year after year; others are stubbornly cheap. The Taiwan dollar, for example, has not been overvalued by our yardstick in 25 years; the Swiss franc has never been undervalued. But Mr Cumby pointed out that clever traders can take these persistent misalignments into account. They can then look to profit from currencies that are not merely out of whack, but more out of whack than they usually are. Based on such calculations he offered forecasts for 13 currencies. A year later, nine of them had moved in the direction he predicted. This strategy worked in the early years of the index. It seems less effective over a longer time span. Our attempt to apply Mr Cumby’s method to the same currencies (plus the euro) over the past 40 years yielded less impressive results. The longer period may make it harder to figure out what counts as a “normal” misalignment. A lot can change in 40 years. Some currencies that were once structurally weak or strong may have flipped over the intervening decades. Alternatively perhaps clever traders have already digested Mr Cumby’s work and added his special sauce to their trading strategies. Some of them may even be checking the price of burgers themselves.
The index’s greatest predictive triumph concerned the euro. Many economists had forecast that the new currency would strengthen after its introduction in 1999. But the Big Mac index showed it was 13% overvalued. Soros Fund Management, a big hedge fund owned by George Soros, later admitted that it had considered acting on this sell signal at the time. In the end, however, it chose to ignore our cue, thus missing out when the euro duly tumbled. Mr Soros, as we put it at the time, must have been “cheesed off”. The Big Mac index invites puns. And our journalists have enthusiastically accepted the offer. Rising currencies are often described as “sizzling”. Weak ones are “undercooked”. The index itself is a “bun-loving guide” to currencies. An article about President Donald Trump’s efforts to punish countries with undervalued exchange rates, said that his threats should be taken with a “pinch of salt”. (A Big Mac contains about 2g.) In few other articles in The Economist would you get away with so many gags, recalls Ms Woodall. Inventing puns was often the hardest part of the exercise: “We were desperate to think of something new.” And we did not always succeed. Some puns made multiple appearances over the years, and many were a bit “corny”, she admits. But they served a useful purpose. In a world where powerful policymakers are browbeating smaller countries about their exchange rates, the puns help “make sure that people don’t take us too seriously”, she says. “It’s the concept that’s serious, not the actual numbers.” ■ This article was downloaded by zlibrary from https://www.economist.com/interactive/briefing/2026/07/30/the-big-mac-index-at-40
China bets that Donald Trump won’t mind it bullying American allies Behind India’s protests is a crisis in the graduate-jobs market Japanese politics is becoming less of a turn-off for the young Beerlao: probably the most important lager in the world Narendra Modi is on a quest to regain his aura
China bets that Donald Trump won’t mind it bullying American allies It has stepped up its abuse of Australia, the Philippines and Japan Jul 30th 2026 “THEY ARE making fools of us,” Gilbert Teodoro junior, the Philippines’ defence secretary, complained to reporters in Manila on July 23rd. Three days earlier, Chinese coastguards had been filmed using oars to batter Philippine sailors aboard a navy vessel at Second Thomas Shoal, an atoll claimed by both countries in the South China Sea. After a brief brawl, the Filipinos, in shorts and T-shirts, repulsed the Chinese coastguards clad in navy uniforms and orange high-viz vests. Two of the Filipinos were later hospitalised. The fracas was just one in a series of recent incidents along archipelagic Asia that add up to a picture of a more aggressive China. In March an
Australian helicopter enforcing United Nations sanctions against North Korea reported a dangerous interception by Chinese aircraft over the Yellow Sea. In early July China launched a ballistic missile from a submarine in the South China Sea over the Philippines and into the South Pacific. And just a day before the punch-up at Second Thomas Shoal, Chinese vessels staged a live-fire exercise in Japan’s exclusive economic zone east of the Philippines. There is a pattern to this uptick in aggressive acts. China began probing American allies soon after a meeting between Presidents Donald Trump and Xi Jinping in Busan in October 2025, escalated its activities in March as America became bogged down in the Persian Gulf, and has gone even further since Mr Trump and Mr Xi held a summit in Beijing in May. “It’s a test of how much Washington is going to react and defend its allies in the region,” says Huong Le Thu of the International Crisis Group, a think-tank with headquarters in Brussels. Yet over the same period relations between China and America have improved. China, say Asian diplomats, is betting that Mr Trump won’t do anything to upset that trend, much less tell China to leave its allies alone. The incidents range along the so-called “first island chain”, the string of archipelagoes stretching from northern Japan through Taiwan to the