Posted by: Dirk | April 18, 2007

Norway and the Big Mac

This weekend I was in Oslo, Norway. It is just a short one-hour flight away from Bremen (which is the nearest airport). Norway is a prime example for the Economist’s Big Mac index. To buy a Big Mac in Oslo, you have to spend 41,50 Norwegian kroners. This is equivalent to $6.63, more than double then what you pay in the US: $3.22. According to the Big Mac index, the Norwegian currency is overvalued by +106%. Only Iceland is dearer.

Why does this price level persist? Well, Norway exports oil and gas. It is incredibly rich and has vast fortunes tucked away which are parked in financial vehicles. Only when they import more, their currency will depreciate. But this is a political question, as people decided to spend some of the oil and gas revenues later.

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