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

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  • Sha, Yezhou
  • Wu, Xi

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.

Suggested Citation

  • Sha, Yezhou & Wu, Xi, 2025. "Black market prices as inflation predictor: Evidence from China’s hyperinflation," Finance Research Letters, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:finlet:v:84:y:2025:i:c:s1544612325010633
    DOI: 10.1016/j.frl.2025.107805
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • G1 - Financial Economics - - General Financial Markets
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East

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