The Big Mac Index (sometimes called 'Burgernomics') is a tool for European travellers to measure how much their money is worth abroad, compared to the euro.
The principle is based on the fact that a McDonald's Big Mac burger is a product that is made in the same way and with the same ingredients everywhere in the world. But the price is not the same everywhere, partly due to the difference in inflation and wages per country.
"Under the hood, the Big Mac Index actually indicates the exchange rate, but in a tangible, easy-to-grasp way," financial expert Chris Sugira said on Flemish radio.
In most European countries, a Big Mac costs about €5, but the same burger only costs the equivalent of €2 in Taiwan, Sugira explained. "So this way, European people know that their €5 are worth more there. The index gives an idea of how much more or less a euro is worth in another country."
Not an exact science
By extending that principle to other products and services, travellers who prefer not to look into their destination's economy or the exchange rate can use the price of a Big Mac to see how expensive or cheap a country is to eat, stay and live in – making it an interesting tool when choosing a travel destination.
"It is obviously not an exact science, but this way you can estimate what your purchasing power is worth in another country and how much you can spend," said Sugira. "But again, do take that index of the famous hamburger with a grain of salt."
The Big Mac index was created by The Economist in 1986 as "an informal way to measure and compare purchasing power between currencies." To this day, the tool is updated twice a year and can be found for free on The Economist's website.
