On Re-Imagining the Role of Big Mac Index in Promoting International Economic Diplomacy: Some Perspectives

Ullas Rao (), Paul J. Hopkinson () and N. R. Parasuraman ()
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Ullas Rao: Heriot-Watt University
Paul J. Hopkinson: Heriot-Watt University
N. R. Parasuraman: Shri Dharmasthala Manjunatheshwara Institute for Management Development

Chapter Chapter 7 in Modern Indices for International Economic Diplomacy, 2022, pp 193-212 from Springer

Abstract: Abstract The Big Mac Index (BMI) developed by “The Economist” in 1986 remains one of the most profoundly influential economic indices to gauge the relative valuation of currencies vis-à-vis price of “hamburgers” lending comparability across economies in wake of unmatched advantage emerging from product standardization (Big Mac is produced to conform exactly similar standards of quality across all the McDonald restaurants operating in different parts of the globe.). Interestingly, the Big Mac has also garnered sufficient publicity among policymakers and thinktanks alike within the realms of international economic diplomacy—thanks in part, to the burgeoning debates revolving around valuation of currencies (over or undervalued) emergent in the new world trade order (WTO or World Trade Organisation has increasingly come under intense attack for failing to dispense the role of effective policing the rules of international trade with emerging markets [EM] and developing economies trading barbs for differential treatments on international trade in relation to developed economies [DM].). The relegation of WTO in relevance owing to emergence of new calibrations on part of influential economies surrounding international trade has given way to new narratives on currency valuation with its concomitant impact on domestic economy and policymaking. “Trade wars” between the two of the largest economies accompanied by accusations of “currency manipulation” have altogether added a fascinating dimension to the humble role played by the BMI. In this chapter, we investigate the divergent issues at play in respect of the Big Mac by screening through the prism of both developed economies (DM) and emerging markets (EM).

Keywords: BMI; Exchange rate; DM vs. EM; International economic diplomacy (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-84535-3_7

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DOI: 10.1007/978-3-030-84535-3_7

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