Each day, I accurately measure Argentina’s inflation using high-frequency data and Purchasing Power Parity theory. By my measure, Argentina’s annual inflation rate is 100%/yr (see the accompanying chart). In response to Argentina’s inflation surge, the Banco Central de la República Argentina (BCRA) did what all central banks with no credibility and junk currencies do. To hold the managed pegged peso exchange rate, which is a fatally flawed exchange rate regime with no credibility, the BCRA has to impose sky-high interest rates. Many people asserted that the crux of the Argentine crisis was an overvalued peso.

Source: Forbes March 16, 2019 22:20 UTC