Big Mac Index

Big Mac Index will show a target exchange rate for the selected currencies and the percentage deviation between the current and the target exchange rate. It is based on purchasing power parity (PPP).

The story behind the Big Mac Index

The Big Mac Index is an informal way of measuring the purchasing power parity (PPP) between two currencies.

The premise of the Big Mac Index is the existence of LOP (Eng. Law of One Price): the dollar price of a burger should not vary from country to country. Commodity prices should be the same in both countries observed, and the main role of the exchange rate is to correct any disproportion.

Exchange rates obtained by purchasing power parity balances the cost of goods and services in both countries.

Price of a Big Mac in USD * Exchange rates = Price of a Big Mac in observed country.

In one sentence, the purchasing power parity is the target exchange rate for the observed currency.

Interface Columns (see attached picture)

• Currency –  Currency if “Denominated As” is set to “US  Dollar Denominated” or Currency pairs if “Denominated As” is set to “Cross”
• Value (local) – Big Mac Value  in the local currency
• Value ($) – Big Mac Value  Denominated in US Dollars
• Exchange Rate – The current exchange rate.
• P.P.P.  – The Target exchange rate or Currency Pair.
• Discrepancy (%) – The Percentage difference between the actual “Exchange Rate” and the target “P.P.P.” Exchange Rate

INPUTS

The following are inputs available in the application:

• Denominated As   –  Cross Target Rates or US Dollar Denominated
• Cross Target Rates are denominated in the relevant currency pair
• US Dollar Denominated rates are always denominated in USD
• Big Mac Value -Big Mac Value is the Value in local currency.
• This value may change due to inflation. Users can update this figure if necessary.
• Currency – Currency Acronym
• USD/CNY rate – The exchange rate for the Chinese Yuan, Chinese Yuan exchange rate is not available within Trading Station and as such you have to enter it manually.
• This parameter allows the creation of non-existing currency, like the German Mark, Italian lira or, Euro ( with P.P.P. only for France)
• Vertical Position (in pixels) – Allow vertical movement of the Indicator data Up or Down.
• LABEL Color – Label Color

Risk Disclaimer

The application displayed on this page does not take in to consideration your individual personal circumstances and trading objectives. Therefore it should not be considered as a personal recommendation or investment advice. Past performance is not indicative of future results. There is no guarantee that the systems, trading techniques, trading methods, and/or indicators will result in profits or not result in losses.

Requirements

An FXCM account is required (including free FXCM demo accounts).

FXCM is an independent legal entity and is not affiliated with Mario Jemic, http://www.addons-to-go.com/ or Indicators World. http://www.addons-to-go.com/ and Indicators World are not owned, controlled, or operated by FXCM and Mario Jemic is not an employee, agent or partner of FXCM.

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