Big Mac Index Reveals Israel's Currency is Nearly 40% Overvalued

The Big Mac Index has just celebrated its 40th anniversary and Israel ranks second in this widely followed measure of purchasing power. The index, which compares prices across countries by measuring the cost of a McDonald's Big Mac, suggests that both the Swiss franc and the Israeli shekel remain overvalued against the dollar.

The average price of a Big Mac in the US is $6.22, while in Israel it costs the equivalent of $7.67, making it the second most expensive after Switzerland where it costs $9.04. The Economist argues that despite the higher dollar price, both currencies are overvalued based on purchasing power parity.

In Switzerland, converting the US Big Mac price into Swiss francs yields about 5.02 francs, which is enough to buy only around 70% of a Big Mac. Based on this comparison, the magazine estimates that the Swiss franc is overvalued by about 45% against the dollar.

The Israeli shekel is similarly estimated to be overvalued by nearly 40%. The top five most expensive markets are rounded out by the UK at $7.40, the euro area at $7.08, and Turkey at $6.91.