Tuesday, July 21, 2009

Burgernomics : To Understand Kurs via Burger

Based burgernomics ruoiah kurs is undervalued. The newest Big Mac Index issued by the Economist last week showed that rupiah undervalued 34 percent. This index discribed how far kurs undervalue or overvalue. Calculatde based purchasing power parity (PPP) theory. Asumption that kurs is equal with Big Mac prices in every country. From the price of Big Mac, we can see the kurs is undervalue or overvalue. In Big Mac Index list, in Jakarta the price of one Big Mac is Rp. 20.900 (US$ 2). Standard price for Big Mac in USA is US$ 3,57. Based on PPP theory, Big Mac in Jakarta is supposed to be Rp. 5.854. The actual kurs for US dollar is Rp. 10.200. Differntiation is 43 percent compaed Big Mac Price in USA. Based the Economist, ruoiah undervalued 43 percent. Confused? You can read on book of economic by Joseph Stiglitz (I sorry, I forget the tittle of his book).

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