Big Mac index: Ukraine's hryvnia one of world's most undervalued currencies

The Ukrainian hryvnia, the national currency, is one of the world's most undervalued currencies, that's according to the so-called Big Mac index.

A Big Mac costs UAH 57 in Ukraine and US$5.74 in the United States. The implied exchange rate is UAH 9.90. The difference with the actual exchange rate, UAH 25.86, suggests the Ukrainian hryvnia remains undervalued, Ukrainian TSN news service reports.

The Big Mac index was invented by The Economist in 1986 as a lighthearted guide to whether currencies are at their "correct" level. It is based on the theory of purchasing-power parity (PPP), the notion that in the long run exchange rates should move toward the rate that would equalize the prices of an identical basket of goods and services (in this case, a burger) in any two countries.

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Burgernomics was never intended as a precise gauge of currency misalignment, merely a tool to make exchange-rate theory more digestible. Yet the Big Mac index has become a global standard, included in several economic textbooks and the subject of at least 20 academic studies.