Big Mac Index suggests that the Thai baht is undervalued

The Economist's Big Mac index is based on the theory of purchasing-power parity, under which exchange rates should adjust to equalise the cost of a basket of goods and services, wherever it is bought around the world. Our basket is the Big Mac. The cheapest burger in our chart is in China, where it costs $1.30, compared with an average American price of $3.15. This implies that the yuan is 59% undervalued.

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S E Asia seems a very cheap area with, maybe, undervalued currencies. Malaysia US1.47 and Thailand US1.51.

Depends what the 'burger' is really made of.

This is more of a COST OF LIVING indicator than a true indicator of relative currency strengths.
By your theory, the Philipine peo, the basket case of Asia, is too weak.
The Thai baht could strengthen but I wouldn't bet on it based on burger prices.

somehow the post below got posted twice

Our basket is the Big Mac

Oh dear, a single item from from a single company would not be called a basket by most economists. The "Big Mac index" has been around for about 20 years. It's most useful to employees with three kids thinking of going ex-pat.

It seems to me that the time is ripe for some new similar indexes e.g.

The Starbuck's Latte Grande Index
The GAP plain white T-shirt Index
The ToysRus Teddy Bear Index
The Ford Mondeo Index
The Yakult pot index


If we put them all together, we might call it a basket!

"THE BIG MAC INDEX
The Economist's Big Mac index seeks to make exchange-rate theory more digestible. It is arguably the world's most accurate financial indicator to be based on a fast-food item. (Here is a brief explanation and video clip.)

As a side-order, this selection of articles includes our Coca-Cola map of the world, our Starbucks tall latte index, the reflections of our Washington columnist on the place of the hamburger in American life, and other articles about McDonald's and fast food."

"BIG MAC INDEX
Burgernomics is based on the theory of purchasing-power parity, the notion that a dollar should buy the same amount in all countries. Thus in the long run, the exchange rate between two countries should move towards the rate that equalises the prices of an identical basket of goods and services in each country. Our "basket" is a McDonald's Big Mac, which is produced in about 120 countries. The Big Mac PPP is the exchange rate that would mean hamburgers cost the same in America as abroad. Comparing actual exchange rates with PPPs indicates whether a currency is under- or overvalued."

www.economist.com/markets/Bigmac/Index.cfm (http://www.economist.com/markets/Bigmac/Index.cfm)

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"Sep 11th 2003
From The Economist print edition
Since 1986, The Economist's Big Mac Index has compared the real purchasing power of currencies around the world. UBS, an investment bank, has taken the idea a step further. It aims to measure well-being by estimating how many minutes workers in various countries must toil to buy a Big Mac. In Kenya, UBS says that it takes just over three hours of labour for a typical worker to afford one of McDonald's hefty burgers. Americans, lucky for them, need to work for only ten minutes. Such differences reflect variations in productivity as well as disparities in local costs of ingredients."

link as in post above.