The Big Mac Index: How a Burger Reveals Currency Exchange Rates

The Big Mac Index compares burger prices across countries to show whether currencies are overvalued or undervalued. Find out how the index is calculated and how to interpret it

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In 1986, The Economist launched a joke for its readers that unexpectedly grew into a serious tool. The Big Mac Index is still quoted by economists, financial journalists and analysts, even though it rests on a single burger. The idea is credited to the magazine’s then economics editor, Pam Woodall: instead of complicated models, check currencies against the price of a product sold almost everywhere in the world.

The index comes out twice a year, in January and July, and covers several dozen economies. For readers, it is a quick way to see where life is expensive and where it isn’t, without opening a single statistical table.

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How the Big Mac Index works: the logic behind the hamburger

At its core is the theory of purchasing power parity. It holds that an identical product should cost roughly the same in any country once the price is converted at the current exchange rate. When it doesn’t, the currency is considered undervalued or overvalued.

The difficulty is that comparing “just a product” is impossible: baskets differ, and so do tastes. The Big Mac removes that problem. McDonald’s operates in well over a hundred countries, and the recipe is almost the same everywhere.

What’s more, there is more behind the price of a Big Mac than meets the eye. According to The Economist, it contains more than sixty ingredients and materials, and its cost also reflects staff wages, rent and taxes. That is why the magazine named its method burgernomics, and the word stuck.

Read more about the specifics of the EU property market in our previous article.

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From burger price to exchange rate: a worked example

The formula is simple. Divide the local-currency price of a Big Mac by its price in the US, and you get an implied exchange rate, the rate at which burgers would cost the same. That figure is then compared with the actual market rate. If the market rate is weaker than the implied one, the currency is considered undervalued; if it is stronger, overvalued.

Take the January 2026 edition. In Japan, a Big Mac cost ¥480, in the US $6.12. The implied rate works out at about ¥78 to the dollar, while on the market a dollar bought around ¥160. By the index’s logic, the yen is undervalued by almost half.

Switzerland is the mirror image. A burger there cost roughly $9, some 48% more than in America, so the franc looks like one of the most overvalued currencies on the list.

What did the July 2026 edition show?

The latest edition came out at the end of July. The average price of a Big Mac in the US rose to $6.22, up from $6.12 in January and $6.01 last July. The most expensive burger is still in Switzerland, while second place unexpectedly went to Israel. In January the country ranked only eighth, but the price of a burger there jumped by roughly 15%, while the shekel strengthened noticeably against the dollar. As a result, a Big Mac there now costs $7.67. By comparison, in Taiwan it goes for just $2.42.

There are quieter stories too. According to July calculations, the Czech koruna was undervalued against the dollar by 12.6%, compared with 10.2% in January.

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Why the burger doesn’t always tell the truth

The Economist itself presents the index as a joke, and that isn’t modesty. In poorer countries, labour and rent are cheaper, so a burger costs less whether or not the currency is weak. In the “raw” version, such countries almost always look undervalued. Taxes, the chain’s pricing policy and the cost of beef also play a part.

To correct for this, in 2011 the magazine added an adjusted version, the GDP-adjusted Big Mac Index. It compares the burger’s price with GDP per person and shows how far a country deviates from the price expected for its income level. The difference can be striking. According to July data, the Hungarian forint looks cheap in the “raw” index: by its measure a dollar should cost around 267 forints, while the market rate was above 313. After adjusting for GDP, however, the undervaluation shrinks to 0.2%.

Why does this index matter for travellers and people who relocate?

A burger is no tool for budgeting: it won’t replace the bill for housing, transport or a doctor. But as a first point of reference, it works well. If a Big Mac in a given country costs almost twice as much in dollars as at home, don’t count on coffee, taxis and lunch in a café being cheap. With cheaper countries, the logic runs the other way.

The index is especially interesting to those who earn in a strong currency and spend in a weaker one. The magazine, incidentally, has gone further: in August 2026 it applied the same idea to salaries in the so-called McWages index, calculating how many Big Macs a year’s income buys in different countries.

So the next time you see a burger price abroad, look at it as more than the cost of lunch. It’s a small economic hint, just not one to take as a verdict.

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