And a Latte to go

A Latte, though, has got to be Starbucks.

I like to pair my a la carte Big Mac with a Latte – only when there is a 1-for-1 offer at Starbucks.

Just the day before, i used the Big Mac Index to gauge if foreign currencies are under- or over- valued relative to our local currencies. It seems that not just Big Mac, but several other everyday products can provide a good gauge as well on the ‘fair value’ of an exchange rate.

Indexes using Standard Products include

Starbucks Latte Index
MacDonald’s Big Mac Index
Domino’s Medium Pepperoni Pizza Index
Nobu Black Cod with Miso Index
Nespresso (capsule) Index
IKEA’s Billy (bookshelf) Index

The Starbucks “Latte Index” was created by the Wall Street Journal in 2013, which now tracks the price of a Starbucks Grande Latte in 76 major cities around the world.

Singapore is proudly in the Top 10 most expensive Starbucks Latte at about $6.13 (converted from USD).

Looks like it would be financially prudent to drink Starbucks anywhere else other than Singapore (and 7 other countries).

While many readers will find it an “economic pain” trying to appreciate burgernomics (Big Mac Index) and lattenomics (Starbucks Index), it is still a more fun way to get your hands dirty outside theory in understanding exchange rates practically. A lighthearted note: Both are still flawed, in terms of measures of Purchasing Power Parity (PPP) between countries. They are distorted by differences in the cost of non-tradables such as costs of raw materials, labor, production, advertising, taxes etc.  

How often do you grab a cup of Latte?

2 thoughts on “And a Latte to go

    1. It has to be a relatively standard good, and LV is not really as common in many countries. Any idea what is a standard LV bag that people buy?

      Like

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