By Steve H. Hanke.
At present, the countries with the highest annual inflation rates are Nigeria at 78.3 percent, Syria at 76.4 percent, Egypt at 56.2 percent, and Venezuela at 47.8 percent1. This is a dramatic change from a year ago, when Venezuela was holding down the top spot with an annual inflation rate of around 700 percent. The accompanying chart tells the story of Venezuela’s inflation plunge, as well as Nigeria’s surge to the ignominious inflation top spot.
It must be stressed that the official inflation rates reported for the “Big Four” are, in some cases, hopelessly out of date (Syria and Venezuela last released official inflation data in December 2015). In any case, all the official estimates are wildly inaccurate.
During episodes of elevated inflation, the most accurate method for estimating overall inflation rates is to employ purchasing power parity (PPP) theory. I use PPP to translate changes in black market (read: free market) exchange rates into annual implied inflation rates. This is a straightforward and accurate exercise which is conducted on a regular basis at the Johns Hopkins-Cato Institute Troubled Currencies Project.
