Big Mac Implied FX Rate

Macroeconomics
Updated Apr 2026 • Has calculator

The PPP-implied exchange rate derived from comparing Big Mac prices across countries.

What is Big Mac FX?

The Big Mac Implied FX Rate applies the theory of purchasing power parity to a single product: a McDonald's Big Mac. Because the burger is produced locally in most countries using similar inputs, its price should reflect local cost levels. Dividing the local Big Mac price by the US price gives the PPP-implied exchange rate — what the exchange rate would be if purchasing power were equalized. If the implied rate is below the actual spot rate, the local currency is undervalued versus the dollar. The Economist has published its Big Mac Index since 1986, making it one of the most recognised informal currency valuation tools.

Formula

Implied Rate = Local Big Mac Price ÷ US Big Mac Price

Worked Example

Worked example — The Economist — Big Mac Index, January 2024

January 2024

Step 1  UK Big Mac price: £4.29
Step 2  US Big Mac price: $5.69
Step 3  Implied GBP/USD = £4.29 ÷ $5.69 = 0.7540 (£ per $1)
Step 4  Actual GBP/USD spot (Jan 2024): 1.2700 ($ per £), or 0.7874 (£ per $)
Step 5  → At 0.7540 implied vs 0.7874 actual, GBP is ~4.3% undervalued vs USD by this measure

Source: The Economist — Big Mac Index, January 2024 (2024-01-01)

Calculate Big Mac FX

Price in the local currency (e.g. £ for UK)

US price in USD (2024: $5.69)

PPP-Implied Rate (local per USD)

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Not investment advice.

How to Interpret Big Mac FX

< 0
Invalid — prices must be positive
> 0
Compare to spot: implied < spot = undervalued; implied > spot = overvalued

📚 Forex Basics — Complete the path

  1. FX Cross Rate
  2. PPP
  3. Big Mac FX
  4. Interest Rate Parity
  5. Carry Trade Return
Sources
  1. The Economist — Big Mac Index
  2. Investopedia — Big Mac PPP