Russian Inflation : A Statistical Pandora's Box
From the start of price liberalization in post-Communist Russia on 2 January 1992 to the present day, a single economic indicator has captured the attention of the majority of the Russian population - the inflation rate. In radio bulletins, in the press and on television the behaviour of prices is charted weekly. The main cause of this inflation is to be found in the increase of the money supply generated by large credits to state industry and to agriculture. These credits were supposed to avoid a collapse of production (and to avert unemployment). In fact, they had the effect of maintaining real balances of these sectors, with the obvious result of continued inflation, leading to calls for further credits to restore the value of real balances. This paper analyzes the course of the very high inflation in 1992 and 1993, focusing on the problematic nature of current Russian price statistics. It goes on to discuss how the Russian price index is calculated, and raises questions about its accuracy.
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