archiveU.S. Economy

  The “law of one price” holds that identical goods should trade for the same price in an efficient market. But how well does it actually hold internationally? The Economist magazine’s Big Mac Index uses the price of McDonald’s Big Macs around the world, expressed in a common currency (U.S. dollars), to measure the extent to which various currencies are over- or under-valued. The Big Mac is a global product, identical across borders, which makes it an interesting one for this purpose.  But the law of one price assumes there are no...

(Adds quotes, context) WASHINGTON, April 25 (Reuters) - U.S. Treasury Secretary Janet Yellen said on Thursday the strong dollar reflected the strength of the U.S. economy and high interest rates, insisting that interventions by governments in currency markets were acceptable only in rare circumstances. Yellen, speaking in an interview with Reuters, acknowledged the strength of the dollar and divergences with other countries, but said the dollar's rise reflected "the strength of the U.S. economy and the level of interest rates." The former chair of the Federal Reserve declined to comment...