This paper reviews and synthetises three areas: The International Comparison Program (ICP), purchasing power parity (PPP) and patterns of household expenditure across countries. To compare countries consistently, the ICP uses relative price levels as PPPs. This approach is seemingly different to...

The Big Mac Index, introduced by The Economist magazine more than two decades ago, claims to provide the quot;true valuequot; of a large number of currencies. This paper assesses the economic value of this index. We show that (i) the index suffers from a substantial bias; (ii) once the bias is...

Government agencies produce indexes that purport to measure international competitiveness. The most common version is the real effective exchange rate, which is some form of weighted average of the real exchange rates of the country's trading partners. Such indexes convey a false sense of...