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Joko Joras (B)

ANTHONY J. EVANS*

4.

December 2012

Grand Latte Index

Your task is to construct a Starbucks Grand Latte Index, as a complement to the Big Mac Index. To do
this you will need local prices and the appropriate exchange rates. The table below shows the local
prices as of September 25th 2009.

United States
Britain
Canada
Japan
China1

Grand Latte prices


In local
currency
$3.75
2.35
C$3.75
420
28

You can find historic exchange rates here:


http://www.oanda.com/currency/historical-rates

Prof. Anthony J. Evans prepared this note for the purpose of aiding classroom discussion. It is not
intended to serve as an endorsement, source of primary data, or illustration of effective or ineffective
management. Anthony J. Evans 2012.
1
The Chinese currency is called Renminbi typically abbreviated as RMB or CNY with the sign .
The unit of the Renminbi is the Yuan ().

5.

Balance of Payments

Try to guess the country by looking at their Balance of Payments.


Country A (from 2008):

Country B (from 2001):

Country C (from 2012):

6.

Current Account Index

You want to understand where the biggest trade imbalances are in the world, so you decide to
construct an index using data from The Economist. Use the scan below:2

There is a difference between the data sections of the print and online edition. Because this case is
intended to help students learn how to read publications such as The Economist, we are using the
print version for the solution. Here, the current account is contained within the Economic Data table.
To see it online look for Trade, exchange rates, budget balances and interest rates The Economist,
November 10th 2012 [http://www.economist.com/news/economic-and-financial-indicators/21565968trade-exchange-rates-budget-balances-and-interest-rates%20]
3

Group the countries based on the following rules:


-

Countries with a current account deficit/surplus greater than $100bn go on their own:
o United States
o China
o Japan (at the time of writing Japan has a current account surplus of $77bn but when I
last compiled the index, in June 2011, it was +$177bn. So keep it on its own)
o Germany
o Saudi Arabia
East Asia = Hong Kong, Indonesia, Malaysia, Singapore, South Korea, Taiwan, Thailand
Mid. East = Egypt, Isreal
Latin America = Argentina, Brazil, Chile, Colombia, Mexico, Venezuela
Nordic/Low countries = Hollad, Denmark, Norway, Sweden, Switzerland, Austria, Belgium
Central & Eastern Europe = Czech Republic, Hungary, Poland, Turkey
Club Med = France, Greece, Italy, Spain
British commonwealth = Britain, Australia, Canada, India, South Africa, Pakistan

Then answer the following questions:


a.
b.
c.

Which three regions have the biggest current account surpluses?


Which three regions have the biggest current account deficits?
What is the current account of the entire world?

7.

Who is Joko Joras?

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