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From the Author
There is an error in Chapter 4 in the section on Adjusted APPP that begins on p. 70. For the adjusted Big Mac approach to FX valuation, the text says that a currency's percentage misvaluation versus the US dollar is equal to the economy's Big Mac's residual in USDs, which is the BM price represented in USDs minus predicted BM price in USDs (on the "line of best fit").
This is incorrect This error was discovered by Santiago Ruiz de Vargas.
He and I coauthored a note to explain how The Economist calculates a currency's correct percentage misvaluation versus the US dollar. That note is available for free at SSRN:
papers.ssrn.com/sol3/papers.cfm?abstract_id=2656881
About the Author
Storrs, Mansfield, CT; Professor University of Connecticut
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