Monday, July 11, 2011

Cry for Argentina's economists

Argentina has an inflation problem.  Economists and business experts recognize that inflation, if measured using standard techniques, is well above 20%.  The Argentine government (which stands for election this year) is not comfortable with this fact.  The official agency in charge of inflation statistics has been politicized since 2007; the official statistics claim the inflation rate is "only" 10%. 

Last week WSJ reported that the situation has escalated.  The Argentine government brought charges against consulting firm MyS Consultores for "publishing false information about inflation data;" jail sentences could result.  At least nine other firms already have been fined $122k each for publishing their own (presumably more accurate) inflation data. What makes the situation even more bizarre is that some Argentine provinces publish their own inflation data and their numbers also cluster in the 20% plus range. 

The fines and prosecutions presumably are intended to discourage honest reporting of inflation in the months before the October election.  I never thought that the basic calculations of inflation that all students of economics master in their first course could result in a fine or jail term.

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