By Park Jae-hyuk



Korea's Big Mac Index edged down two notches in sixth months to the 25th position, according to a report this month by The Economist, implying the Korean won may be more undervalued than it was before.



The data showed that the signature hamburger of McDonald's costs $3.68 (4,400 won) here.



Switzerland topped the index at $6.35, followed by Norway at $5.67 and Sweden at $5.26. In Asia, Singapore was the highest at $3.89.



Created in 1986 by The Economist, the index measures the purchasing power parity between two currencies in a unique way, based on the notion that exchange rates should move toward the rate that would equalize the prices of the same product ㅡsuch as a Big Mac ㅡ in any two countries.



For example, the index indicates the Korean won has been undervalued by 27.3 percent against the U.S. dollar, as the burger has been sold for $5.06 in the United States compared to $3.68 here.



A Big Mac in Korea cost the same in Korean won last July, but the index was $3.86 at that time in line with a different exchange rate then. This means the Korean won may be more undervalued than it was before.



Although such undervaluation can also be interpreted as Korea's Big Mac price being low in a global perspective, some consumers still argue the hamburger is too expensive, noting Koreans' average income.



Some experts have continued to doubt the legitimacy of the index, saying the price of a Big Mac is also decided by labor costs and rent, as well as the price of raw materials.



They have also pointed out that eating habits and stances on the hamburger differ from country to country.



The Economist therefore introduced an adjusted index using the "line of best fit" between Big Mac prices and GDP per capita to address such criticisms.



The magazine said the discrepancy between the price predicted by the income per person and its actual price gives a supersized measure of currency under- and over-valuation.



