Implied Inflation Rates in Russia Using High-frequency Online Grocery Prices

Since the beginning of 2015 Russia has experienced high rates of inflation characterized by large fluctuations in the price level. The reasons for that are various starting from ruble devaluation till political sanctions imposed on imported products. Despite the fact that inflation rate calculated by the government statistics center (using CPI) was relatively high, the society and mass media often claim that official results underreport the true inflation level and they are not representative in terms of actual costs for the average consumer. However, there are no reliable alternative inflation measures that are more granular and of higher frequency than provided officially. Using a novel dataset of daily online prices from Moscow-based grocery stores we construct an index following closely the CPI methodology. We find that on average official statistics is consistent with movements in actual grocery online prices, but Internet prices show higher volatility. In this work, we show that fluctuations in online prices during this period can be explained by the changes in foreign currency rate, which has dramatically appreciated in terms of the rouble.