Saturday, October 17, 2015

Big Mac Index

https://en.wikipedia.org/wiki/Big_Mac_Index#Manipulation

The big mac index is a quick attempt at explaining purchasing power parity.  The idea being that simply knowing the exchange rate is not enough to know how valuable your money from one country will actually be when you try to purchase actual goods there.

Here is the fun part though:
Critics of the presidency of Cristina Fern√°ndez de Kirchner in Argentina and many economists believe that the government has for years falsified consumer price data to understate the country's true inflation rate. The Economist stated in January 2011 that Big Mac index "does support claims that Argentina’s government is cooking the books. The gap between its average annual rate of burger inflation (19%) and its official rate (10%) is far bigger than in any other country." That year the press began reporting on unusual behavior by the more than 200 Argentinean McDonald's restaurants. They no longer prominently advertised Big Macs for sale and the sandwich, both individually and as part of value meals, was being sold for an unusually low price compared to other items. Guillermo Moreno, Secretary of Commerce in the Kirchner government, reportedly forced McDonald's to sell the Big Mac at an artificially low price to manipulate the country's performance on the Big Mac index. In June 2012, the price of the Big Mac value meal suddenly rose by 26%, closer to that of other meals, after The Economist, The New York Times, and other media reported on the unusual pricing. A Buenos Aires newspaper stated "Moreno loses the battle".

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