a_unique_person
19th January 2007, 10:51 PM
http://www.theage.com.au/news/technology/ipod-index-trumps-the-bigmac-one/2007/01/18/1169095897045.html
In a sign of the times, a Sydney-based bank has developed a new indicator for foreign exchange movements based on Apple's iPod music player, and as an alternative to the long-standing Big Mac Index.
Launched today, the CommSec iPod Index is predicting a 15 per cent drop in the Australia dollar against the US dollar - music to exporters' ears.
...Twenty years on, and with the same light-hearted approach, Commonwealth Securities has devised the CommSec iPod Index, and based on a product that is also the same the world over.
Apple sold 21 million iPods in the past quarter.
"A key difference between the iPod and Big Mac approaches is that Big Macs are made in a host of countries across the globe whereas iPods are predominantly made in China," said CommSec chief economist Craig James.
"Simply, an iPod nano should broadly cost the same across the globe. If there were substantial price differences customers would switch their purchases to other countries, especially given the power of the internet."
The Big Mac Index is based on the theory of purchasing power parity, which suggests that, in the long run, exchange rates move to equalize the prices of identical goods and services in different countries.
Under the theory, if a McDonald's Big Mac burger is cheaper in a particular country than it is in the United States when expressed in US dollars, then that country's currency may be seen as undervalued and could go up to correct the imbalance.
But CommSec's James said the Big Mac index could be distorted by taxes, transport costs, labour laws and trade barriers in each country as they are locally made in each nation, while the iPod is mostly manufactured in China.
He mentions a reasons why prices might vary betweem countries, but nothing about the price set by the local Apple company to maximise profit.
In a sign of the times, a Sydney-based bank has developed a new indicator for foreign exchange movements based on Apple's iPod music player, and as an alternative to the long-standing Big Mac Index.
Launched today, the CommSec iPod Index is predicting a 15 per cent drop in the Australia dollar against the US dollar - music to exporters' ears.
...Twenty years on, and with the same light-hearted approach, Commonwealth Securities has devised the CommSec iPod Index, and based on a product that is also the same the world over.
Apple sold 21 million iPods in the past quarter.
"A key difference between the iPod and Big Mac approaches is that Big Macs are made in a host of countries across the globe whereas iPods are predominantly made in China," said CommSec chief economist Craig James.
"Simply, an iPod nano should broadly cost the same across the globe. If there were substantial price differences customers would switch their purchases to other countries, especially given the power of the internet."
The Big Mac Index is based on the theory of purchasing power parity, which suggests that, in the long run, exchange rates move to equalize the prices of identical goods and services in different countries.
Under the theory, if a McDonald's Big Mac burger is cheaper in a particular country than it is in the United States when expressed in US dollars, then that country's currency may be seen as undervalued and could go up to correct the imbalance.
But CommSec's James said the Big Mac index could be distorted by taxes, transport costs, labour laws and trade barriers in each country as they are locally made in each nation, while the iPod is mostly manufactured in China.
He mentions a reasons why prices might vary betweem countries, but nothing about the price set by the local Apple company to maximise profit.