How to compare currencies' subjective value?
September 16, 2007 2:30 PM   Subscribe

I understand that trading between currencies is what sets their exchange value, but is there a standard way of determining how each currency feels to people living in each currency's native country/ies?

This may have been asked here recently, but I couldn't find it. In case it's not clear what I'm asking, an example would be whether a pound feels twice as valuable to someone living in London as a dollar feels to someone living in New York (assuming neither travels outside their home city). My guess would be that a pound in London feels more valuable than a dollar in New York, but not twice as valuable. And my guess is that a Euro to a Berliner feels about equal to a dollar to a New Yorker, but is there a way to quantify the comparative subjective value? Are there conversion tables for this like there are for exchange rates? Is there something economically significant about a discrepancy between two currencies' exchange value and the comparison of those two currencies' felt, local values?
posted by nobody to Work & Money (4 answers total) 2 users marked this as a favorite
The Big Mac Index
posted by Bighappyfunhouse at 2:32 PM on September 16, 2007

You might want to look at Purchasing Power Parity (which is the basis of the Big Mac Index)
posted by thrako at 2:40 PM on September 16, 2007

Yep, PPP is what you're looking for.
posted by rkent at 4:37 PM on September 16, 2007

You could try the iPod index instead, if you prefer...
posted by loquax at 7:06 PM on September 16, 2007

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