23. The Beer Standard. In 1999 The Economist maga- zine reported the creation of an index or...

Question:

23. The Beer Standard. In 1999 The Economist maga- zine reported the creation of an index or standard for the evaluation of currency values in Africa. Beer was chosen as the product for comparison because McDonald's had not penetrated the African conti- nent beyond South Africa, and Beer met most of the same product and market characteristics required for the construction of a proper currency index. Investec, a South African investment banking firm, has replicated the process of creating a measure of purchasing power parity like that of the Big Mac Index of The Economist, for Africa. The index compares the cost of a 375 milliliter bottle of clear lager beer across sub-Sahara Africa. As a measure of pur- chasing power parity, the beer needs to be relatively homogeneous in qualities across countries, and needs to possess substantial elements of local manufactur- ing, distribution, and service, in order to actually pro- vide a measure of relative purchasing power. The beers are first priced in local currency (purchased in the taverns of the local man, and not in the high-priced tourist centers and servers), then converted to South African rand. The prices of the beers in rand are then compared to form one measure of whether the local currencies are either undervalued (-%) or over- valued (+%) versus the South African rand Use the data in the table below and complete the calculation of whether the individual African currencies listed are overvalued or undervalued.

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