Posts tagged: Russia

The Big Mac Index and The Purchasing-Power Parity

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 towards the rate that would equalise the prices of an identical basket of goods and services (in this case, a burger) in any two countries. For example, the average price of a Big Mac in America in July 2016 was $5.04; in China it was only $2.79 at market exchange rates. So the “raw” Big Mac index says that the yuan was undervalued by 45% at that time.

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. For those who take their fast food more seriously, we have also calculated a gourmet version of the index. Below there are the data as of July 2016.

 

Raw index

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Russia’s emigration: is there a problem?

“For more than a century, Russia has suffered periodic waves of mass emigration. Now it could face yet another one, perhaps leading to the largest brain drain the country has experienced in 20 years. According to Russia’s state statistical agency, 350,000 people emigrated from Russia in 2015 — 10 times more than five years ago. The outflow began in earnest in 2012, driven mostly by political friction in the country, but Russia’s current economic crisis has accelerated the pace.

As highly skilled Russians emigrate, the future of innovation and private business in the country has been called into question. Meanwhile, migrants from mostly Muslim former Soviet states are entering Russia in search of work, altering the ethnic and religious composition of the population and heightening tension in the process.

In nearly every decade of its history, Russia has watched large portions of its population head for foreign shores. Between 1880 and 1914, 2 million Jews fled the Russian Empire, seeking refuge from pogroms. The Russian Revolution then sent roughly 1.4 million refugees fleeing the country, including some of the empire’s brightest minds: Nobel Prize-winning writer Ivan Bunin, author Vladimir Nabokov, helicopter designer Igor Sikorsky and artist Marc Chagall, among others.

It is difficult to get reliable migration statistics for the early Soviet period. All five of the Soviet statistical chiefs between 1926 and 1940 were shot, and under the Soviet government, demographic statistics became more propaganda than science. But generally, emigrants found their way out of the Soviet Union in three major waves over the union’s lifetime. During World War II, 700,000 to 1 million Russians — mostly anti-Communists, Soviet prisoners of war or those dodging the draft — fled the Soviet Union to settle in the West. Decades later, about 2 million Jews emigrated mainly to Israel and the United States, seeing an opportunity when Soviet General Secretary Leonid Brezhnev somewhat relaxed the Kremlin’s monitoring of the Soviet Jewish community. Then, with the loosening of border controls in the 1980s, people began to move across Russia’s border in both directions. Three million ethnic Russians living in the Soviet and Communist bloc outside of the Russian republic returned to Russia. At the same time, leaving the country were 700,000 ethnic Russians, along with 300,000 Soviet Jews — a number that jumped to over 1 million after the bloc’s collapse.

The rise of Russian President Vladimir Putin brought emigration from Russia to a relative crawl. Between 1999 and the mid-2000s, living standards in Russia quadrupled, the country’s economy stabilized, and the overwhelming popularity of Putin’s administration put an end to political turmoil. Russia’s renaissance had begun. As a result, emigration by ethnic Russians was consistently outpaced by the number of immigrants pouring in, particularly from former Soviet states. After peaking in 2000, the number of Russian emigrants dropped from about 146,000 that year to a mere 32,000 in 2009, even in the middle of an economic crisis.

 

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