Faculty Mentor: Dr. Anne Donnelly and Michelle Leonard
College: Warrington College of Business
Since 1986, The Economist’s Big Mac Index (BMI) has served as a tool that allows individuals to understand exchange-rate differences and identify over and undervalued currencies based on the price of the Big Mac, in its respective form, in varying countries. The Consumer Price Index (CPI) is another index that aggregates and averages the price changes of predetermined goods. This research examined the relationship between the BMI and the CPI in Brazil, Russia, India, China, the European Union, and the United States from January 2006 to January 2020, with the goal of finding a correlation between the two. Using CPI data from the Federal Reserve Bank of St. Louis, BMI data from The Economist, and the Analysis Toolpak within Excel for data analysis, the Pearson’s correlation coefficient, the coefficient of determination, and linear regression equation were calculated for the BMI and CPI. Results demonstrated a favorable correlation between the two for the small sample of currencies tested. The results supported that the BMI is a useful tool, alongside the CPI, for aiding the average consumer in understanding exchange rates and currency valuations. Overall, the BMI and the CPI can be used to complement each other when examining a variety of economic environments.
Click the video below to view the student's poster pitch.