Big Mac index estimates hryvnia rate at 8.9 UAH to 1 USD
Ukrainian hryvnia was recognized as the most underestimated currency according to Big Mac index.
It was reported by The Economist.
The Big Mac index was invented by The Economist in 1986. It is based on the theory of purchasing-power parity and is used as jocose index of currency value.
For example, the average price of a Big Mac in America in January 2018 was USD 5.28; in China it was only USD 3.17 at market exchange rates. So, the "raw" Big Mac index says that the yuan was undervalued by 40% at that time.
In Ukraine Big Mac's price was USD 1.64 in January 2018. It means that hryvnia is underestimated with regards to dollar by 69%.
Hryvnia rate, according to The Economist evaluation, shall be UAH 8.9 to USD 1.
However, according to the rating, currency of only three countries is deemed as overestimated, namely Switzerland, Sweden and Norway.
Burgernomics was never intended as a precise gauge of currency misalignment, merely a tool to make exchange-rate theory more digestible. Yet the Big Mac index has become a global standard, included in several economic textbooks and the subject of at least 20 academic studies.
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