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Sunday, 29 September 2013

Official and unofficial Daily Index


Official Daily CPI

An official Daily CPI is a 2-, 3- or 4-month lagged, daily interpolation of the official monthly published CPI. 

Applications

1. It is used by countries that issue government capital  inflation-indexed bonds to value these bonds on a daily basis. It derives its official status from this use by governments since it is based on the official monthly published CPI.

2. It is used as the Daily Index under the US GAAP and IFRS authorised capital maintenance in units of constant purchasing power accounting model. This model is required in 

(i) IAS 29 Financial Reporting in Hyperinflationary Economies and

(ii) Capital Maintenance in Units of Constant Purchasing Power at all levels of inflation and deflation.

The Daily CPI is freely available up to a month and a half in advance. The official daily inflation (official daily general price level) is thus always known in advance. There are no surprises with the official Daily CPI.

The Daily CPI was proposed to the IASB for use in IFRS "X" Financial Reporting in High Inflationary Economies.

Examples

A few Daily CPIs are available here.  

Lists of some countries that issue sovereign capital inflation-indexed bonds are available here and here. All these countries already have an official Daily CPI.

Unofficial Daily Indices

1. The US Dollar parallel rate is used in high inflationary and hyperinflationary countries like Venezuela, Belarus, Iran, etc. as a proxy for a real-time Daily CPI. In this case the daily US Dollar parallel rate indicates the real general price level. It can sometimes change more than once a day as from about 3000 percent annual hyperinflation.

The US Dollar parallel rate has played this very important role in many countries over at least the last 100 years. This is one of the main reasons why the US Dollar has come to be regarded as a global relatively stable unit of account. It is obviously not an absolutely stable unit of account. 

The US Dollar parallel rate in Venezuela is available here.

2. Unofficial Daily Indices are available here on a commercial (paid) basis. They are available with a 3 or 10 day lag. These unofficial Daily Indices have no official use or role. They are simply further proof that the general price level changes at least daily.

Nicolaas Smith

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