The Economist has updated its Big Mac Index for 2024, showing that the rand is still severely undervalued against the US dollar – and has lost even more value at the start of the year compared to 2023. The Big Mac Index is an initiative created by The Economist that aims to measure whether currencies are priced at their “correct” level.
It is based on the theory of purchasing-power-parity (PPP) – the notion that, in the long run, exchange rates should move towards the rate that would equalise the prices of an identical basket of goods and services (in this case, a Big Mac burger) in any two countries. The Big Mac is selected for comparison as the popular fast-food meal is widely available and remains fairly consistent in pricing; however, it is by no means an exact measure. According to The Economist, ‘Burgernomics’ was never intended to be a precise gauge of currency misalignment but merely a tool to make exchange-rate theory more digestibl
Economist Big Mac Index 2024 Rand Undervalued US Dollar Exchange Rates Purchasing-Power-Parity Currency Misalignment