In September of 1986, the Economist launched an index of the of Big Mac prices throughout the world. Initially the idea was somewhat of a joke by poking fun of Index publications. The joke turned serious and as a result Big Mac Index is still going strong to this day. The index as it turns out, is a great tool to measure Purchasing Power Parity, otherwise known as PPP. What can the Big Mac index do for you? The Index is used as a method of predicting exchange rate movements. Why? Because the rate between two currencies should naturally adjust so that the Big Mac cost the same in both the US Dollar and whatever currency we are comparing it to. The Big Mac was chosen because the Burger is basically the same wherever you go and more importantly, you can buy the same tasty Big Mac almost anywhere in the world. It is also a lot easier to compare a Big Mac then a Quarter Pounder with cheese for example, because according to Pulp Fiction we would have to change the name to “Royal with Cheese” if we were in France. So Basically the Big Mac is the same burger, same name and many locations throughout the world. For our paper, we obtained the Big Mac PPP exchange rate between the US Dollar and the Canadian Dollar, Japanese Yen, Pound Sterling and the Singapore Dollar. We first wanted to know what the exchange rate should be by taking the (current Exchange Rate)*(US Dollars per Burger / Local Currency per Burger). We then wanted to find out if the currency is over or under-valued according to our figures. We obtained this information by (Exchange Rate minus should be rate)/ (Should Be value from previous equation). If this percentage is positive then we believe the currency is over-valued. If this currency is negative then we believe the currency to be under-valued. We expect to see currencies that we believe are under valued according to the Big Mac Index to appreciate against the dollar in the next few years. If the currency is overvalued, according the Big Mac Index, we would expect to see the currency depreciate over the next few years. We did see through our data that the Canadian Dollar did rebound against the US dollar after its low value in 2002. On the surface the Big Mac Index held up almost perfect for explaining the surge in Canadian Dollar value versus the US Dollar.
The global economy has been recovering from the financial crisis which occurs in 2008, then has a weak growth for most developed countries over 2012 and 2013. But economic activity in Canada has expanded at a faster pace than most other major advanced countries in 2012; however, economic performance in Canada has been unsteady throughout 2013 (The Economic review, 2013). After the last quarter in 2010 GDP growth rate grows rapidly, the GDP grows slowly but steadily in 2012 which remains at around 3 percent. Real GDP growth rate in Canada grows slowly in the first quarter of 2013, but increased by 5 percent in the second quarter ,then remains the same level until the first quarter of 2014 (Statistics Canada, 2014). In 2014, the Canadian government take a series economic action plan as a guide for the economy development such as improving investment conditions, ...
Saputo has production plants in Canada, America, Argentina and Australia, and many of their products are sold on the international market. Due to the fact that products are sold internationally, exchange rates affect the end price of products in different countries. For example, many of the raw materials used in the Argentine plants, such as milk, is imported from Canada. Therefore, the exchange rate between Canada and Argentina affects the cost of raw materials for the Argentina plant. If the Canadian dollar appreciates against the Argentine peso, the cost of raw materials will increase for the production plant, and vice versa.
The Canada-U.S. trade relationship is not static. Political and business strategies and practices change on both sides of the border, and events occur such as "mad cow disease" that are beyond almost everyone's control.
...of the recent price drop, in August 2013 the coffee CPI was higher than about 38% than it had been last decade.
The rate of a Big Mac compare at a local McDonald’s is that the Big Mac index was created by The Economist in 2009 as a light-hearted direct to whether money are at their “accurate” level. It is related on the hypothesis of “purchasing-power parity”, the idea that in the long run swaps rates must move in the way of the speed that would match the prices of an equal basket of commodities and services in any two countries. The average rate of a Big Mac in united state in July 2009 was 4.79 dollar.
Is a "strong" U.S. dollar always good? Is a "weak" dollar always bad? Understanding of it is a necessary in the marketplace. The terms “Strong” and “weak” dollar are a “hot topic” which is always bandied about by economists on a daily basis and also the public. This issue is so important to almost everyone.
People outside of Canada are baffled at how Canada ended up in such a state of affairs. Canada as a country has a lot going for it. A high GNP, and high per capita income in international terms. It is ranked at the top of the...
I also invested in currencies like the US dollar, the Canadian dollar and the New Zealand dollar. I found that the US dollar dropped by a considerable amount whilst the Canadian dollar and the New Zealand dollar had a minimal increase in
In the last 20 years the penetration of the Canadian market by American cultural industries is still extremely strong. The United States is still the main source of culture products. American products represent 81% of all culture commodity imports. Canadians watch American TV shows, listen to American music, love American sports teams, drive American cars and buy American goods at American stores like Walmart. They eat American food, drink American beer (sometimes).
Despite the fact that recent reports have shown that the Chinese currency is currently facing descending pressures, it is, however, likely to improve in the future because of the enhanced terms of trade, current account surplus that is growing, and high net saving. Another reason that will make the Chinese RMB to do well in the future it is because the currency has solid fundamentals and the economy of the country is significantly increasing at a higher rate than the GDP rates. Due to the growing Chinese economy to being the second largest economy, the Chinese currency yuan has been acknowledged by the International Monetary Fund (IMF) as a major global
The situation at hand is Burger King’s downfalls within the competitive Japanese market. Burger King faces tremendous competition. McDonald’s controls half of the entire fast-food market in Japan having 2,000 outlets and generating $2.5 billion in sales. KFC has 1,040 stores making it number two in the fast-food market. The most effective way to analyze Burger King’s situation is through the SWOT analysis method.
The stability of currency values plays a significant role for economic and financial stability. It is not difficult to see the exchange rate fluctuations are widely regarded as damaging. As the movements of the exchange rate have significant and large effects on the trade balance, resource allocation, domestic prices, interest rate, national income and other key economic variables. Then can exchange rate movements be predicted by these fundamental economic variables?
McDonalds also uses diversification in its global marketing. McDonalds recognizes that different countries have different values, customs, and tastes. Therefore, McDonalds satisfies these diverse global tastes by diversifying the menu according to each country’s unique preferences. This added diversification tactic, allows McDonalds to stay competitive in a global market. Examples of McDonalds globally diversified menu would be that McDonalds offers an exclusive beefless menu to its customers who live in India. This is because eating beef in India is sacrilegious. To meet the tastes of customers in India, McDonalds created new offerings such as the “Pizza McPuff” and the “McVeggie.” McDonalds considers the cultural tastes in every country it opens its doors
The economy in the United States was recently experiencing what is now called the Great Recession which occurred from December of 2007 to June of 2009. During this recession we experienced a decrease in our gross domestic product and experienced an increase to our unemployment. Since 2003 the American economy has been seen inflation rates as low as .1% in 2008 and as high as 4.1% in 2007. Rates such as these detail the increase and decrease in prices of products throughout the economy and has a considerable influence on the supply and demand of goods from cars to bread. In the past ten years inflation rates have continually seen positive values w...
The foreign exchange market is one of important mechanism in the international business because foreign exchange is an intermediary for all nations in term of the growth of the economy. There are many functions of foreign exchange market in the global economy. In the international business, it uses the foreign exchange markets in four ways. First, the pay...