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The Big Mac index names the Russian ruble as the most undervalued currency in the world (but miscalculates)

The Russian national currency, the ruble, is undervalued by 70% against the dollar, according to the Big Mac index, which calculates The Economist magazine. According to this indicator, the ruble is currently the most underestimated currency in the world, while the Swiss franc is the most overvalued (by 19%).

The Big Mac index, created by the weekly in 1986, is based on the theory of purchasing power parity, According to which the exchange rate of the currencies has to equal the cost of the same products in several countries. The magazine calculates its index based on the price of a McDonald's Big Mac sandwich, one of the most basic products offered by the largest fast food chain in the world.

The latest Big Mac statistics show that almost all world currencies are very undervalued against the US dollar, apart from the Swiss franc, the Norwegian krone and the Swedish krona. The three most undervalued currencies are the Russian ruble, the Ukrainian hryvna and the Argentine peso.

Miscalculation

According to the media, a Big Mac in the US costs 5.58 dollars, while in Russia the hamburger has a price of $ 1.65 (110 rubles, according to the official exchange rate of 66.9 rubles per dollar). The price of the sandwich indicates that the exchange rate underestimates the ruble by 70.5%, while the official exchange rate shows the difference of only 19.74%.

However, the weekly apparently made a mistake in its calculations regarding the Russian currency: in no part of the country a Big Big Mac costs less than 130 rubles, according to the official website of the chain. Moreover, said price of 130 rubles has remained unchanged for Russia since at least 2016.

In addition, in the five previous Big Mac indexes (since July 2016), The Economist already indicated the value of 130 rubles. And all the time it placed the level of undervaluation of the ruble by approximately 60%.

If the calculation is done but with the actual price of 130 rubles (less than $ 1.95), the undervaluation of the Russian currency will be 65.1%, which will place it in second place, behind the Ukrainian hryvnia (65.2%).

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