Big Mac Index Calculator
Compare currency purchasing power using the Big Mac Index.
Enter prices in two countries to see implied exchange rate and currency over- or undervaluation.
The Economist magazine started the Big Mac Index in 1986 as a half-joke and a serious teaching tool. The idea: a Big Mac is roughly the same product everywhere, so the price gap between two countries is a quick proxy for how far their exchange rate sits from purchasing power parity (PPP).
The formula has two pieces.
implied_exchange_rate = price_local / price_base
This tells you what one unit of the base currency would buy at McDonalds prices alone. Compare it to the actual market exchange rate:
valuation_pct = (implied_rate / actual_rate - 1) x 100
A positive number means the local currency is overvalued against the base — a Big Mac in Switzerland will cost more in dollar terms than a Big Mac in the US, suggesting the franc is “expensive.”
A negative number means undervalued. Russia, India, and most of Southeast Asia chronically show heavy undervaluation by this metric, which roughly tracks lower wages, lower rents, and cheaper inputs.
Why this is rough but useful: a Big Mac price bundles labor, rent, beef, wheat, and franchise fees. Tradeable goods (the beef, the cheese) should converge toward world prices over time. Non-tradeable inputs (rent, wages, local taxes) do not. The gap between the index and the market rate is mostly the non-tradeable share — which is why poorer countries always look “undervalued.”
Don’t read the Big Mac Index as a forecast. It is a snapshot of relative prices, not a prediction that the Russian ruble will rally because it is cheap. The Economist now publishes a “GDP-adjusted” version that controls for income levels, which usually shrinks the apparent mispricing.