Latest

Forex Dictionary

Zombie Currency

by Miracle Admin

Definition - What does Zombie Currency mean? A zombie currency is a legal currency that is no longer used as

Forex Dictionary

Yard

by Miracle Admin

Definition - What does Yard mean? A yard is trading slang for 1 billion units of a particular currency. The

Forex Dictionary

World Currency

by Miracle Admin

Definition - What does World Currency mean? A world currency is a theoretical trade currency that would replace national currencies

Forex Dictionary

Whipsaw

by Miracle Admin

Definition - What does Whipsaw mean? Whipsaw is a slang term for any sharp move in price action that is

Mira FX
⥤From Brokers to Trader⥢
  • No-Deposit Bonuses
  • Deposit Bonus
  • Demo Contest
  • Live Contest
  • Education
    • Article
    • Strategies
  • Forex School
  • Brokers
    • No-deposit Bonuses
  • Calendar
  • Live Charts
  • Central Banks
    • Bank of Canada
    • Bank of England
    • Bank of Japan
    • European Central Bank
    • Federal Reserve
    • Reserve Bank of Australia
    • Reserve Bank of New Zealand
    • Swiss National Bank
No Result
View All Result
  • Education
    • Article
    • Strategies
  • Forex School
  • Brokers
    • No-deposit Bonuses
  • Calendar
  • Live Charts
  • Central Banks
    • Bank of Canada
    • Bank of England
    • Bank of Japan
    • European Central Bank
    • Federal Reserve
    • Reserve Bank of Australia
    • Reserve Bank of New Zealand
    • Swiss National Bank
No Result
View All Result
Mira FX
No Result
View All Result
Home Forex Terms

Big Mac Purchasing Power Parity Index (Big Mac PPP)

Miracle Admin by Miracle Admin
in Forex Terms
A A

Definition – What does Big Mac Purchasing Power Parity Index (Big Mac PPP) mean?

The Big Mac purchasing power parity is a novel way to measure the accuracy of currency rates that was created by the Economist. The basic idea behind the PPP is that, after exchanging currencies, the price of identical goods in different countries should be equal. This means that a coffee at Starbucks in Canada should cost the same amount in USD after conversion as it does in America. If it is cheaper to buy a coffee in Canada, then the Canadian dollar is undervalued (or the USD overvalued). The Big Mac PPP uses a McDonald’s Big Mac as the benchmark good because it is widely available.

ForexTerms explains Big Mac Purchasing Power Parity Index (Big Mac PPP)

The Big Mac PPP is a good measure for people investing in the forex markets. The only problem is that governments often hamper the efficiency of the market. For example, China has historically kept the Yuan artificially undervalued to make Chinese goods much cheaper than goods produced in other countries. The Yuan will continue to linger behind other currencies in PPP until the government floats it freely. So forex investors have to watch the government’s policies as carefully as the Big Mac PPP in order to accurately forecast a change.

ShareTweetShareSendShareSend

Other Terms

Forex Dictionary
Forex Terms

Headline Effect

by Miracle Admin

Definition - What does Headline Effect mean? The headline effect refers to the impact of bad news from the popular press on a an economy and its currency. When negative financial news is carried in the newspapers of TV news.....

Read more
Forex Dictionary
Forex Terms

Oil

by Miracle Admin

Definition - What does Oil mean? Oil is the common way of referring to petroleum, a mixture of hydrocarbons that humans burn for energy. Although it is naturally occurring, the scarcity of oil has made it a valuable commodity. Countries.....

Read more
Forex Dictionary
Forex Terms

Spread Betting

by Miracle Admin

Definition - What does Spread Betting mean? Spread betting is a type of speculation that involves betting on the price movement of a currency pair without actually purchasing or selling lots. A spread betting company quotes two prices that make.....

Read more
Forex Dictionary
Forex Terms

Bearish Trend

by Miracle Admin

Definition - What does Bearish Trend mean? A bearish trend is a general downward movement in the value of a currency pair. ForexTerms explains Bearish Trend Only primary trends are called bullish or bearish. Shorter term, secondary trends form and.....

Read more

Related Articles

Thai Baht Foreign Currency in The Foreign Exchange Market

Thai Baht Foreign Currency in The Foreign Exchange Market

by Miracle Admin

The Thai baht (THB) is considered to be an exotic currency in the Forex market. Thailand is the world’s twenty-fourth...

Consumer Confidence Report – Forex Calendar

Consumer Confidence Report – Forex Calendar

by Miracle Admin

Consumer confidence announcements report on how confident the consumers within an economy are. Confident consumers tend to spend more because...

Inflation Announcement – Forex Calendar

Inflation Announcement – Forex Calendar

by Miracle Admin

Inflation announcements report on how quickly or slowly the general price level in the economy is rising. Monitoring inflation is...

No Result
View All Result
  • Education
    • Article
    • Strategies
  • Forex School
  • Brokers
    • No-deposit Bonuses
  • Calendar
  • Live Charts
  • Central Banks
    • Bank of Canada
    • Bank of England
    • Bank of Japan
    • European Central Bank
    • Federal Reserve
    • Reserve Bank of Australia
    • Reserve Bank of New Zealand
    • Swiss National Bank

Mira FX