High dispersion in inflation rates

Last night I met a former hotel employee who hand-calculated inflation figures for the region around his resort, using year-on-year price changes for the official consumer price basket. He came up with an annual inflation rate (if memory serves) of 28%, which is nearly two and a half times the official Reserve Bank of Malawi figure of 11.4% (as of March).

I’m really surprised that the local rate would be so much higher than the national one, since a lot of the goods in the basket are fairly tradeable. I don’t, however, suspect that things are being intentionally gamed: I know lots of folks who currently or formerly worked at central banks and even interned at one myself, way back when, and they’re uniformly well-intentioned data geeks like myself. But this is a way bigger spread than we see, for example, across US regions, so I’m at a loss to explain what’s going on.

3 thoughts on “High dispersion in inflation rates”

  1. Hey Jason, perhaps the big spread comes due to a lack of good information. The Reserve Bank of Malawi must have a harder time putting these estimates together than the Fed. Perhaps it would be interesting to test this idea out by looking at these spreads across countries. I would bet that countries with worse information, typically low income countries, would have higher spreads.

    1. That’s a good point. Maybe they just pull price data from the cities? I have no idea what the RBM’s approach is. I’d love to examine these spreads cross-nationally but I don’t know where to look for that data.

      For the US, to be clear, it is the Bureau of Labor Statistics (BLS) that assembles inflation statistics and the Fed uses their numbers. I was assuming the RBM put together Malawi’s inflation numbers because that’s where I found them (and also because America’s division of labor on this is pretty weird, I don’t think that happens in other countries), but I’m not positive who assembles them.

Leave a Reply

Your email address will not be published. Required fields are marked *