Hanke’s World Inflation Measurements

My work on measuring inflation in countries experiencing elevated inflation or hyperinflation began in the early 1990s. That early work resulted in an invitation to write the chapter “World Hyperinflations,” which is contained in the Routledge Handbook of Major Events in Economic History (2013). In that chapter, Nicholas Krus and I used primary data to document 56 episodes of hyperinflation (inflation rates of 50% per month or more), starting with France’s hyperinflation of 1795–1796. Since that publication, I have documented 15 additional hyperinflations. Consequently, the current Hanke-Krus Hyperinflation Table contains 71 episodes.

The most important price in an economy is the exchange rate between a country’s local currency and the world’s reserve currency, the U.S. dollar. As long as there is an active black market (read: free market) for a currency and data are available, changes in the black-market exchange rate can be reliably transformed into accurate measures of countrywide inflation rates. The economic principle of purchasing power parity (PPP), coupled with a model that I developed, allows for this transformation.

Beyond the theory of PPP, the intuition of why PPP represents the “gold standard” for measuring inflation in countries experiencing elevated inflation rates and/or hyperinflation is clear. All items in these economies are either priced in a stable foreign currency (the U.S. dollar) or a local currency. If goods are priced in terms of the local currency, those prices are determined by referring to the dollar prices of goods and then converting them to local prices after checking with the black-market spot exchange rate. Indeed, when a price level is increasing rapidly and erratically on a day-by-day, hour-by-hour, or even minute by-minute basis, exchange-rate quotations are the only source of information on how fast inflation is actually proceeding. That is why PPP holds, and why we can use high-frequency (daily) data to calculate inflation rates for countries with high rates of inflation (inflation rates exceeding 25 % per year).

Each day, I use my purchasing power parity model and high-frequency data to measure prices in the countries with the world’s highest inflation rates.

The table below, “Venezuela’s Annual Inflation Rate Measured by Prof. Hanke,” contains recent inflation measurements for Venezuela, which is the country with the world’s highest inflation rate at present (August 2026). In the past, Venezuela has experienced two episodes of hyperinflation: November 2016–February 2019 and April 2020–December 2020.