Cato Institute’s Project on troubled currencies and underreporting of inflation

A very interesting research by Prof Steve Hanke of Cato Insti.

He shows how some countries are underreporting inflation using exchange rates from black markets:

For various reasons — ranging from political mismanagement, to civil war, to economic sanctions — some countries are unable to maintain a stable domestic currency. These “troubled” currencies are associated with elevated rates of inflation, and in some extreme cases, hyperinflation. Often, it is difficult to obtain timely, reliable exchange-rate and inflation data for countries with troubled currencies.

To address this, the Troubled Currencies Project collects black-market exchange-rate data for these troubled currencies and estimates the implied inflation rates for each country. The data and estimates will be updated on a regular basis. A current snapshot is presented in the table below. 

It show Argentina’s actual inflation is 25% but reports 10.3% and so on. Six economies have troubled currencies..

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