Big Mac Index: Israel Climbs to Second Place Globally

The Big Mac Index of the weekly magazine 'The Economist', published on Friday, places Israel in second place in the world, immediately after Switzerland. The index comparatively examines the price of a McDonald's Big Mac in various locations around the world. In the previous ranking, published in January of this year, Israel was ranked in eighth place.

Behind the unusual jump in the ranking is a combination of two factors: the sharp increase in the price of a Big Mac in Israel and the strengthening of the shekel against the dollar. In January, the price of the hamburger was 20 shekels, and at the time, according to the exchange rate used by 'The Economist', the price was equivalent to about 6.36 dollars, indicating that the shekel was priced about 4% above its fair value against the dollar.

In February, McDonald's Israel announced a 15% increase in the price of a Big Mac to 23 shekels. As a result, and with the help of the strong shekel, the price of the Israeli hamburger climbed to the 7.4 dollar range. Thus, Israel overtook countries that usually appear at the top of the index, including Norway, Denmark, and Sweden. For comparison, in January 2025, a Big Mac was sold in Israel for only 17 shekels.

What does the hamburger actually measure?

The Big Mac Index was born 40 years ago as an exercise intended to explain the principle of purchasing power parity. According to the theory, an identical product should cost a similar price in different countries after converting the prices into the same currency. When a Big Mac is much more expensive in Israel than in the US in dollar terms, the index may indicate that the shekel is too strong relative to the dollar — or that local prices are too high.

The choice of a Big Mac was not accidental. It is a product sold in many countries, built in a similar way, and relies on a long list of local goods such as meat, bread, and vegetables, but also includes employee wages, rent, electricity, transportation, advertising, and taxes. 'The Economist' notes that behind the hamburger hide more than 60 different components and raw materials, so even though it is a single product, its price is influenced by many parts of the local economy.

Big Mac prices are received directly from McDonald's or from local correspondents around the world, while exchange rates are taken from the financial databases of the Reuters news agency and the international financial data company Refinitiv.

Alongside the index that converts the hamburger price into dollars, the weekly also publishes an index adjusted for GDP per capita, assuming that prices in wealthy countries tend to be higher to begin with. Therefore, second place does not necessarily mean that Israel is the second most expensive country in the world, but rather that the price of a Big Mac in Israel and the shekel rate at the time of the check is the second most expensive price in dollar terms.

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Israel has already been at the top

This is not the first time that Israel has appeared in the upper part of the index. Already in 1997, Israel was ranked third in the world, after Switzerland and Denmark. The price of a Big Mac then stood at 11.5 shekels, compared to a theoretical price of 8.18 shekels according to purchasing power against the dollar. The index's conclusion was that the shekel was overvalued by about 40%.

Starting in 2002, Israel did not appear in the index, and 'Globes' reported at the time that it was removed after senior government officials claimed to 'The Economist' that the index in question was not relevant to the Israeli economy. At that time, a Big Mac in Israel cost 12.9 shekels, an amount that was equivalent to only about 2.84 dollars.

Not just the cost of living

'The Economist' points to large gaps between the purchasing power of the dollar, the Chinese yuan, the Japanese yen, and the euro and their market rates. The weekly criticizes the Chinese economy, where the weak yuan gives an advantage to exporters, while the US deals with large deficits and extensive imports.

In the Israeli case, the conclusion is complex. On one hand, second place fits well with the local feeling of a high cost of living, especially in the food and restaurant sectors. On the other hand, a significant part of the jump stemmed from the strengthening of the shekel and the commercial decision to raise the price of the hamburger by 15%.

This is why it is worth treating the index as an indication, and not as a 'verdict'. Israel's second place largely tells the story of the shekel and the price of the hamburger and not necessarily the entire story of the cost of living in Israel.