Abstract
The aim of this study is to identify : (1) profile of exchange rate and purchasing power parity of IDR against US $ based on Big Mac Index compared to the exchange rate of other countries, and (2) the position of the Big Mac Affordability of Indonesia compared to other ASEAN countries. The results showed that based on Big Mac index during the period April 1998 up to January 2015, IDR exchange rate tends to be undervalued against the USA dollar. The cause of the currency tends to be in a position of undervalued due to the components of non-tradable have not been included in Big Mac index. The index of Big Mac Affordability indicates that there is a great disparity of income between Singapore and five other ASEAN countries. The purchasing power of the real income of the people in Singapore is nearly five times the real income of the people in Indonesia.
Highlights
As a country with an open economy, Indonesia has done a lot of economic cooperation with other countries, especially in the field of international trade
The purpose of the study is to analyze the profile of purchasing power parity of Indonesia Rupiah (IDR) compared with other countries based on Big Mac index, as well as to determine the position of Big Mac Affordability of Indonesia compared to other ASEAN countries
Price of Big Mac Burger in Indonesia and the United States, the Exchange Rate of IDR to US Dollar Since 1986 The Economist magazine has published the price of Big Mac burger type in various countries
Summary
As a country with an open economy, Indonesia has done a lot of economic cooperation with other countries, especially in the field of international trade. Kuncoro (2015) argues that comparisons between countries based on the Gross National Income (GNI) per capita is often misleading. A theory used to explain the behavior of the currency exchange rate is the theory of Purchasing Power Parity (PPP). This happens due to the conversion of the income of a country into the same currency at the official rate (for example : the US dollar). Big Mac index is published by The Economist magazine (from 1986) as a way of measuring the purchasing power parity between
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