Big Mac price never catches up with dollar – Dallas Fed blog
Prices barely adjust to currency swings even after four years, economists find
Currency appreciation does not reflect a change in prices even after several years have passed, new research from the Federal Reserve Bank of Dallas argues.
Scott Davis, Ben Kim and Andrei Zlate examine price changes alongside currency moves in their research, which was published on October 15. The meat of their finding is that financial shocks, not monetary ones, drive exchange rates.
They stack up an exchange rate index across 14 advanced economies based on the price of a McDonald’s Big Mac in
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