Central Bank of the Republic of China (Taiwan)

PRESS RELEASE Release                                                 Date: November 14, 2025

Statement Regarding The Economist's Recent Piece ''The Hidden Risks in Taiwan’s boom''

Regarding the Nov. 14, 2025 article published by The Economist, claiming that based on its Big Mac Index, Taiwan's long-standing policy of keeping its currency weak has impaired Taiwan's purchasing power, pushed up housing prices, and stored up growing financial risks, the Bank offers the following clarification to avoid misinterpretations. 

1. Many factors affect exchange rate movements. In principle, exchange rates are determined by market dynamics of supply and demand and cannot be adequately measured by the price of a single product. With financial liberalization, cross-border capital movements have become a dominant factor behind changes in the New Taiwan Dollar (NTD) exchange rate.  

2. The Economist has in the past acknowledged that its Big Mac Index might not be the suitable indicator for currency valuation. 

(1) A single-product index is an inadequate measure for overall currency valuation. The Economist admitted in 2003¹ that its Big Mac Index ''is flawed,'' and even noted in 2006² that the Index has been ''widely used and abused around the globe.'' 

(2) Using other single-product indexes to assess whether a currency is over- or under-valued may yield drastically different results. For instance, in 2016, Nomura Holdings Inc. calculated the ''iPhone Index'' based on the prices of iPhones in different countries. Among the 23 global peers included in the comparison at that time, the US dollar was deemed the most severely undervalued currency,³ a conclusion that was notably different from the Big Mac Index. Furthermore, based on the latest iPhone prices, the NTD is still overvalued by 17.1% against the US dollar, which runs contrary to the Big Mac Index's assessment of a 55% undervaluation according to the aforementioned article.

3. Nowadays, supply and demand forces in forex markets are mainly associated with financial transactions. In the case of Taiwan, in 2024, the sum of financial account inflows and outflows by residents and nonresidents was approximately 19.3 times the amount of trade in goods. In this view, purchasing power parity (PPP), calculated solely on the basis of a basket of goods and services, is not a sufficient indicator for determining the equilibrium exchange rate. Therefore, it may not be deemed appropriate as a standard for assessing whether a currency is over- or under-valued, much less when using a single product to measure overall currency valuation. 

4. In light of the Big Mac Index's limitations as an adequate metric for the NTD’s reasonable valuation, the adverse outcomes attributed to an undervalued NTD by The Economist in its Nov. 14, 2025 article lack sufficient basis. Indeed, similar arguments have been raised externally in the past and we have addressed them through multiple press releases, explanatory notes, and supplementary materials of the post-Quarterly Board Meeting press conferences (listed in the Attachment).

5. Despite a widening in Taiwan's goods trade surplus with the United States in the year (2025) so far, the U.S. Treasury Department has never requested an NTD appreciation during multiple communications with the Bank regarding macroeconomic and exchange rate issues over this period.

Notes:

¹The Economist (2003), ''McCurrencies, '' The Economist, Apr. 24.

²The Economist (2006), ''McCurrencies, '' The Economist, May 25.

³Barton, Susanne (2016), ''Drop the Big Mac, Pick Up an iPhone to Divine Dollar’s Direction, '' Bloomberg, Jul. 26.