Purchasing Power Parity (PPP) is one of the most widely researched areas in international finance and one of the most controversial in the theory of exchange rate determination. This book demonstrates the applications of Purchasing Power Parity in exchange rate determination as well as more practical applications of salary comparison and the cost of living across borders. It uses "The Economist" magazine's annual "Big Mac index" in place of the traditional basket of services used in PPP research. The author demonstrates that this is a good solution to the index number problem since it is readily available and more appealing as an international monetary standard. The book also shows how "The Big Mac Index" could have been used to predict the Asian currency crisis and the Mexican Peso stand off where more traditional economic measures failed.
LI LIAN ONG is an economist with the International Capital Markets Department at the International Monetary Fund in Washington DC. Prior to joining the IMF in 2002, Li Lian worked in Sydney and Hong Kong as the Asia economist for the Macquarie Group. She has also worked as a staff assistant at Arthur Andersen in Kuala Lumpur, Malaysia.