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2 Calculate the dollar price of a Big Mac (column 3), the implied PPP of the dollar (column 4), and the local currency under(-)/over(+)valuation (column 6) for Denmark and Hong

Kong.

3 In 2003, it cost $0.80 to buy a Big Mac in Argentina, $2.54 to buy a Big Mac in the USA, and $4.61 to buy a Big Mac in Switzerland. How do we explain these deviations from PPP?

4 A web page of OANDA.com (see www.oanda.com/products/bigmac/bigmac.shtml) provides exchange rate trends of various currencies. Use this web page to obtain the latest version of the hamburger standard shown in table 5.2.

Sources', www.oanda.com/products/bigmac/bigmac.shtml as of Feb. 11, 2003; R. E. Cumby, "Forecasting Exchange Rates and Relative Prices With the Hamburger Standard. Is What You Want What You Get With McParity?" Manuscript, Georgetown University, 1995; and M. R. Pakko and P. S. Pollard, "For Here or To Go? Purchasing Power Parity and the Big Mac," Review, Federal Reserve Bank of St. Louis, Jan./Feb. 1996, pp. 3-21.

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