On Measuring Hyperinflation

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1 On Measuring Hyperinflation Steve H. Hanke and Charles Bushnell Key Points Introduction 1

2 On Error and Deception Figure 1: The fall in the value of the Venezuelan Bolívar: the black market USD/ VEF exchange rate USD/VEF Exchange Rate (y-axis inverted) 0 5,000 10,000 15,000 20,000 08/09/2017: 20, Date 2

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4 Figure 2: Venezuela s annual inflation rate Annual Inflation Rate 2000% 1800% 1600% 1400% 1200% 1000% 800% 600% 400% 200% 0% Measured Implied Annual Inflation Official Annual Inflation Suppressed Inflation: difference between official annual inflation and measured implied inflation Previous High (24/07/2015): % Suppressed Inflation Measured Implied Annual Inflation (08/09/2017): % Previous High (04/08/2017): % Official Inflation (31/12/2015): % Date 4

5 On the Hanke Krus World Hyperinflation Table 5

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8 Table 1: The Hanke Krus World Hyperinflation Table (2013, amended 2016) Location Start Date End Date Month With Highest Inflation Rate Highest Monthly Inflation Rate Equivalent Daily Inflation Rate Time Required For Prices To Double Currency Type Of Price Index Hungary 1 Aug Jul Jul x % 207% 15.0 hours Pengö Consumer Zimbabwe 2 Mar Mid-Nov Mid-Nov x % 98.00% 24.7 hours Dollar Implied Exchange Rate* Yugoslavia 3 Apr Jan Jan x 10 6 % 64.60% 1.41 days Dinar Consumer Republika Srpska 4 Apr Jan Jan x 10 6 % 64.30% 1.41 days Dinar Consumer Germany 5 Aug Dec Oct % 20.90% 3.70 days Papiermark Wholesale Greece 6 May Dec Oct % 17.90% 4.27 days Drachma Exchange Rate China 7 Oct Mid-May 1949 Apr % 14.10% 5.34 days Yuan Wholesale for Shanghai Free City of Danzig 8 Aug Mid-Oct Sep % 11.40% 6.52 days German Papiermark Exchange Rate** Armenia 9 Oct Dec Nov % 5.77% 12.5 days Dram & Russian Ruble Consumer Turkmenistan 10 Jan Nov Nov % 5.71% 12.7 days Manat Consumer Taiwan 11 Aug Sep Aug % 5.50% 13.1 days Yen Wholesale for Taipei Peru 12 Jul Aug Aug % 5.49% 13.1 days Inti Consumer Bosnia and Herzegovina 13 Apr Jun Jun % 4.92% 14.6 days Dinar Consumer France 14 May 1795 Nov Mid-Aug % 4.77% 15.1 days Mandat Exchange rate China 15 Jul Aug Jun % 4.75% 15.2 days Yuan Wholesale for Shanghai Ukraine 16 Jan Nov Jan % 4.60% 15.6 days Russian Ruble Consumer Poland 17 Jan Jan Oct % 4.50% 16.0 days Marka Wholesale Nicaragua 18 Jun Mar Mar % 4.37% 16.4 days Córdoba Consumer Congo (Zaire) 19 Nov Sep Nov % 4.26% 16.8 days Zaïre Consumer Russia 20 Jan Jan Jan % 4.22% 17.0 days Ruble Consumer Bulgaria 21 Feb Feb Feb % 4.19% 17.1 days Lev Consumer Moldova 22 Jan Dec Jan % 4.16% 17.2 days Russian Ruble Consumer Venezuela 23 Nov Ongoing Nov % 3.94% 17.9 days Bolivar Exchange Rate*** Russia / USSR 24 Jan Feb Feb % 3.86% 18.5 days Ruble Consumer Georgia 25 Sep Sep Sep % 3.86% 18.6 days Coupon Consumer Tajikistan 26 Jan Oct Jan % 3.74% 19.1 days Russian Ruble Consumer Georgia 27 Mar Apr Mar % 3.70% 19.3 days Russian Ruble Consumer Argentina 28 May-89 Mar Jul % 3.69% 19.4 days Austral Consumer Bolivia 29 Apr Sep Feb % 3.53% 20.3 days Boliviano Consumer Belarus 30 Jan Feb Jan % 3.22% 22.2 days Russian Ruble Consumer 8

9 Table 1: continued Location Start Date End Date Month With Highest Inflation Rate Highest Monthly Inflation Rate Equivalent Daily Inflation Rate Time Required For Prices To Double Currency Type Of Price Index Kyrgyzstan 31 Jan Jan Jan % 3.20% 22.3 days Russian Ruble Consumer Kazakhstan 32 Jan Jan Jan % 2.97% 24.0 days Russian Ruble Consumer Austria 33 Oct Sep Aug % 2.80% 25.5 days Crown Consumer Bulgaria 34 Feb Mar Feb % 2.71% 26.3 days Lev Consumer Uzbekistan 35 Jan Feb Jan % 2.64% 27.0 days Russian Ruble Consumer Azerbaijan 36 Jan Dec Jan % 2.63% 27.0 days Russian Ruble Consumer Congo (Zaire) 37 Oct Sep Nov % 2.57% 27.7 days Zaïre Consumer Peru 38 Sep Sep Sep % 2.57% 27.7 days Inti Consumer Taiwan 39 Oct May-49 Oct % 2.46% 28.9 days Taipi Wholesale for Taipei Hungary 40 Mar Feb Jul % 2.30% 30.9 days Crown Consumer Chile 41 Oct Oct Oct % 2.12% 33.5 days Escudo Consumer Estonia 42 Jan Feb Jan % 2.11% 33.6 days Russian Ruble Consumer Angola 43 Dec Jan May % 2.06% 34.5 days Kwanza Consumer Brazil 44 Dec Mar Mar % 2.02% 35.1 days Cruzado & Cruzeiro Consumer Republic of Congo 45 Aug Aug Aug % 1.95% 36.4 days Franc Consumer Poland 46 Oct Jan Jan % 1.93% 36.8 days Zloty Consumer Armenia 47 Jan Feb Jan % 1.85% 38.4 days Russian Ruble Wholesale Tajikistan 48 Oct Nov Nov % 1.69% 42.0 days Tajikistani Ruble Wholesale Latvia 49 Jan Jan Jan % 1.67% 42.4 days Russian Ruble Consumer Turkmenistan 50 Nov Jan Jan % 1.63% 43.4 days Manat Consumer Philippines 51 Jan Dec Jan % 1.58% 44.9 days Japanese War Notes Consumer Yugoslavia 52 Sep Dec Dec % 1.57% 45.1 days Dinar Consumer Germany 53 Jan Jan Jan % 1.51% 46.8 days Papiermark Wholesale Kazakhstan 54 Nov Nov Nov % 1.48% 47.8 days Tenge & Russian Ruble Consumer Lithuania 55 Jan Jan Jan % 1.45% 48.8 days Russian Ruble Consumer Belarus 55 Aug Aug Aug % 1.44% 49.3 days Belarusian Ruble Consumer Taiwan 57 Feb Feb Feb % 1.38% 51.4 days Taipi Wholesale for Taipei 9

10 On the Method and Use of Purchasing Power Parity to Estimate Venezuela s Inflation Rate 10

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13 P A P B = S A/B 1 + ΔP A P A 1 + P = 1 + B P B S A/B S A/B ΔP A P A = [(1 + P SA B B ) (1 + P B SA B )] 1 Inflation Venezuela = [( ) ( )] 1 =

14 Figure 4: Venezuela s monthly inflation rate Monthly Inflation Rate 240% 220% 200% 180% 160% 140% 120% 100% 80% 60% 40% 20% Monthly Inflation (01/07/2014): -3.33% Monthly Inflation (09/12/2014): 70.72% Monthly Inflation (30/11/2016): % Monthly Inflation (09/09/2017): 93.69% Monthly Inflation (05/04/2015): % Monthly Inflation (06/08/2017): % 0% -20% -40% Date Reflections on Why Purchasing Power Parity is Powerful During Hyperinflation 14

15 ć ć ć ć 15

16 ć Concluding Remarks 16

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