The Azerbaijani manat is 58,9% undervalued against the US dollar and as a result, the sixth the most undervalued currency against the US dollar, APA-Economics reports citing the Economist.
A Big Mac costs 3.95 manat in Azerbaijan and US$5.66 in the United States. The implied exchange rate is 0.70. The difference between this and the actual exchange rate, 1.70, suggests the Azerbaijani manat is 58.9% undervalued.
The big mac index was invented by The Economist in 1986 as a lighthearted guide to whether currencies are at their “correct” level. It is based on the theory of purchasing-power-parity (PPP), the notion that in the long run exchange rates should move towards the rate that would equalise the prices of an identical basket of goods and services (in this case, a burger) in any two countries.
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