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The national Bank explained the value of the hryvnia according to the index big Mac

Нацбанк объяснил стоимость гривны по индексу Биг-МакаThe index suggests that in Ukraine in comparison with many countries with very low commodity prices, says the NBU.

The hryvnia is one of the outsiders of the index, the big Mac, as in Ukraine, very low prices, and the dollar on the world market is too overrated. This was stated by the Deputy head of the NBU Oleg Churiy.

“If you carefully read the study by The Economist, that not only Ukraine has undervalued the currency. There are several dozen countries that undervalued against the dollar by about 50-60%. But it’s got a lot of reasons. First, the U.S. dollar is very strong and overvalued currency. To say it another way: the dollar is overvalued in relation to many currencies of developing countries,” said Curi.

Second, he says, the index of big Mac is not a sign that “the exchange rate should return to a level, which is designed according to this index”.

“It’s more of a long-term trend, which might indicate that the currency may strengthen”, – said the Deputy head of the NBU.

The index of big Mac is determined based on the theory of purchasing power parity, under which exchange rates in the long term should be aligned in accordance with the prices of identical food basket in different countries.

“In addition, it is not only about the exchange rate, but also about the level of prices. That suggests that in Ukraine in comparison with many countries is actually very low prices of these goods,” said Curi.

NBU in its policy is not based on the index of big Mac, according to the Central Bank.

“Since the transition in 2015 to a policy of flexible exchange rate, the NBU bought $ 4 billion. For us the calculation of The Economist is interesting from the point of view of what is happening in other countries of the world, but it’s not the pointer that we need to do,” he said.

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