Black market prices as inflation predictor: Evidence from China’s hyperinflation

Yezhou Sha and Xi Wu

Finance Research Letters, 2025, vol. 84, issue C

Abstract: Extreme economic conditions provide insights into validating fundamental economic theories. In this study, we examine the relationship between several black market commodity price series and the inflation rate in China during a period of hyperinflation. Our findings reveal that black market commodity prices effectively predict inflation, aligning with the spot–future parity theorem. We also show that efforts to stabilize prices and unify fiscal and financial systems in China caused structural breaks in black market commodity prices.

Keywords: Black market price; Hyperinflation; Spot–future parity; VAR model (search for similar items in EconPapers)
JEL-codes: E31 G1 N15 (search for similar items in EconPapers)
Date: 2025
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:84:y:2025:i:c:s1544612325010633

DOI: 10.1016/j.frl.2025.107805

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