What Big Macs tell us about the disconnect between prices and exchange rates

Jonathan Davis, Ben Kim and Andrei Zlate

Dallas Fed Economics from Federal Reserve Bank of Dallas

Abstract: The Economist's Big Mac Index is a measure of the real exchange rate that instead of measuring the price of a basket of goods and services, measures the price of one good, the McDonald's Big Mac. Recent empirical work finds that financial factors, and not monetary ones, underlay a very high correlation between nominal exchange rates and the Big Mac-based real exchange rate.

Date: 2026-10-15
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Persistent link: https://EconPapers.repec.org/RePEc:fip:d00001:103957

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