Economics at your fingertips  

Currency indexes and consistent currency misvaluation: Illustrations using Big Mac data

O’Brien, Thomas J. and Santiago Ruiz de Vargas

Research in International Business and Finance, 2019, vol. 48, issue C, 464-474

Abstract: A currency’s misvaluation versus an index of other currencies, termed the currency’s multilateral misvaluation, depends on the index weights. This study clarifies the idea of consistency in multilateral misvaluation and provides instructive empirical illustrations using several currency index weighting methods. For both of the Economist’s Big Mac approaches (“raw” and Adjusted) to intrinsic foreign exchange value, the study finds that a multilateral currency misvaluation estimate based on an equal-weight index does not necessarily provide a reasonable approximation to the estimate of a more economically-meaningful currency index.

Keywords: Exchange rates; Currency misvaluation; Currency index; Big Mac (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Research in International Business and Finance is currently edited by T. Lagoarde Segot

More articles in Research in International Business and Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-05-11
Handle: RePEc:eee:riibaf:v:48:y:2019:i:c:p:464-474