| This study examines data known as the Big Mac Index, an annual presentation by The Economist magazine of average prices of Big Mac sandwiches sold in countries around the world, in empirical tests of Purchasing Power Parity. The purpose is to mine the data of the index from the years 1986 to 2002 searching its usefulness as a viable data set for further testing. Data is collected from 14 countries that span 16 years of observations. The data is manipulated to allow Germany and Japan, as well as, the United States to be the base country. Using Augmented Dickey Fuller and Phillips-Perron tests for unit roots and the Johansen cointegration methodology, cointegrating relationships are found. No significant difference is found when the United States dollar is not the numeraire currency. In addition, this study does not find stronger relationships between countries that are strong and geographically close trading partners. |
