Do you belive in the Big Mac Index?

Question

http://www.mafhoum.com/press3/98E8.pdf here is a way to use it. It says the Rand is 16%under value if you do the calculation. It is a very good way of evaluating a currency. If you follow markets you will see it works.

Answer 1

No, a country's currency strengh or weakness must be determined by capital inflows and outflows as well as it's balance of trade, when considering that South Africa is currently running a 9% of GDP shortfall on its current account then it should be assumed that the currency is in fact overvalued by perhaps 20% or more.

The Big Mac index is more a reflection of buying power.

Answer 2

I am a bit very stupid with things like that Barend, but one thing is for sure I would not by a Big Mac in Switzerland.......looks very expensive there to me.