The Big Mac Index

(The weekly series - Pocket Money - where I explain financial basics in fewer than 200 words. Feel free to make suggestions!)

The Big Mac Index is a light-hearted way of comparing the relative purchasing power of different currencies which was devised by The Economist magazine in 1986 to simplify the exchange rate theory.

That theory states that a basket of goods in two different countries should cost relatively the same, stabilised by the exchange rate. In this way, you can work out if a currency is over or undervalued.

Today, a Big Mac in Sweden costs 82SEK and in the UK it’s £5.99. So I work that out as 1 SEK = £0.073 ish (5.99 / 82).

The actual exchange rate as I’m writing this (19th of January 2026) is 1 SEK = £0.081. 

This means the SEK is undervalued. At the actual exchange rate, 82 SEK should equal £6.64, but a Big Mac only costs £5.99 in the UK. So you're getting more burger for your kronor in Sweden than the exchange rate suggests you should - Big Macs are cheaper here relative to the currency value.

The index is jokey but pretty famous and relies on the ubiquity of Macdonalds and the Big Mac. 

Love Eleanor. xxx