How to adjust for inflation when performing historic currency conversions

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Question: 

Hello from New Zealand! I have a dataset of sales of products at auction from 1960-2020 in various countries. I have converted all of the sale prices to NZD but I would also like to adjust for inflation.My question is: since inflation is different in each country, should I adjust for inflation according to each country's inflation data before converting the values to NZD or should I just convert all of the values to NZD and then adjust for inflation based on New Zealand's inflation rates? The latter would be the easiest but would it result in bad data?

Answer: 

The most correct way should be adjusting inflation according to each country's inflation data before converting the values to NZD if New Zealand is the baseline to compare with. The latter will not necessarily result in bad data as long as the PPP and exchange rate among the countries do not vary too much.

Answered by:
Haoran Li
Ph.D. Student
Last updated on May 1, 2020