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...

Survey of literature on PPP up to July 2000. Includes a geogetric analysis of PPP theory, issues related to deviations from parity and an examination of empirical evidence on PPP.

Purchasing Power Parity (PPP), the link between exchange rates and prices, is a fundamental building block of international finance, one which has been attracting increasing research interest during the past three decades. The Big Mac Index (BMI), invented by 'The Economist' magazine in 1986,...

Emphasis on the interplay of real and monetary factors in determining exchange rates both in the short and long run.

The stochastic approach to index numbers has been successfully applied to the estimation of the Consumer Price Index (CPI). One distinct advantage of this approach is that it provides the whole distribution of the index, not simply a point estimate of the rate of inflation. In this paper, we...

The Millennium Boom of 2003–2011 made the resources industry hugely profitable and led to a surge in new projects around the world. This had major implications for the Australian economy: resource investment accounted for almost half of all business investment at the peak, the capitalisation...

The stochastic approach is a new way of viewing index numbers in which uncertainty and statistical ideas play a central role. Rather than just providing a single number for the rate of inflation, the stochastic approach provides the whole probability distribution of inflation. This paper...

Brief analytical notes on the interactions between exchange rates and commodity prices. Gold and iron-ore are used as examples of the issues raised. The paper also presents a stylised model to determine the effects of exchange-rate changes on the internal and external prices of commodities. Also...