Professor of Applied Economics Roberto Rigobon, co-creator of the Billion Prices Project at MIT, asserts that countries with higher inflation are recovering more slowly from the global financial crisis. During a talk that was part of MIT Sloan’s Alumni Weekend, he predicts there will be another financial crisis and that governments will again over-react in an attempt to address it: “Whenever we have a financial crisis, regulation always overshoots.”
Rigobon says that neither rising commodity prices nor monetary expansion explains rising inflation rates, and points out that the traditional measures that governments uses to track the prices of goods are inefficient or suspect. He and MIT Sloan colleague Alberto Cavallo launched the Billion Prices Project, which now tracks online prices of commodities in 70 countries, providing real-time information on major inflation trends. As a result, even after the earthquake hit Japan earlier this year, the Billion Prices Project was still able to monitor prices in that country and track Japan’s inflation rate.