According to the "Big Mac Index", the dollar was very high in Argentina after the devaluation

After weeks of extremely high volatility, the dollar eventually accumulated appreciation higher than 50% until now this year and over 70% in twelve months.

And the reading done by the government was optimistic . One of the officials who openly defended the green jump was the Minister of Production, Dante Sica, who claimed that this new exchange rate " is very good" since it meant " hug "for going out to export.

"The greatest concern in the future will be to maintain this type of change, after this effort," Sica adds,

However, in a context where debate is growing among economists, who warn about new short-term market pressures, an inevitable question arises: is it a level of equilibrium ? Or does the scenario push the currency to continue on an upward trajectory?

For the moment, a few months ago, the FocusEconomics monthly report was published, in which a group of international and local economists draws projections on the key variables of the economy. Here the end of the year

. will end in 2018 at the price of $ 30.28 . What would that imply? To reach this level, throughout the year, the accumulated devaluation would be greater than 62% . That's practically double the projected inflation.

However, these estimates go against the result of the last "Big Mac Index". According to this index developed by The Economist magazine, and which has many followers around the world, the dollar would be overvalued in the ARgentina close to 50 percent.

How does it work? Basically, the English publication compares the price of the famous McDonald's hamburger in several countries around the world, following the theory of international price parities, which states that similar products tend to be the same.

In other words, the postulate is that, with the same amount of dollars converted, one should be able to purchase a well-identical in all nations to be a food

Therefore, if in some territories the hamburger has a value remote from the reference value – the United States, because it is stated in dollars – it is considered that there are internal factors that distort the level real type. In good romance, we can say that if a sandwich in a country is cheaper than in the United States, it would mean that the coin would be cal is undervalued against dollar . Otherwise, if the sandwich is more expensive than in the United States, the domestic currency sign would then be overvalued.

What is the new index?
The last update of this index has just been published and the survey shows a striking result : the Argentine peso is close to 50% undervalued compared to the dollar.

How is it calculated?

-The Economist takes into consideration a price for the Big Mac of $ 75 .

– At the rate of change in progress this represents approximately u $ s2.67 against u $ s.5.51 established for USA ]

– If is divided the value in pesos in Argentina ( 75 $ ) by that in force for the USA. ( u5.51 )

– This gives an implicit exchange rate of 13.61 .

– As it stands, badysts have noted that the difference between this figure ( 13.61 ) and the current rate of $ 27.7 (at the time the report was published), "suggests that the Argentine peso is undervalued by 50%."

Graphic So The Economist:

The "fine print"
A small exception must be made, not to mention that the exchange rate has varied in recent days to return closer to the [ad_2]
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