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Hyperinflation theory

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Vinayak Goldar
Vinayak Goldar

Hyperinflation is very high inflation, typically over 50% per month, that occurs when prices rapidly increase out of control. It can be caused by large fiscal deficits funded by increases in the money supply. To tame hyperinflation, countries must slash fiscal deficits, end central bank funding of deficits, separate central bank control from government control, and control money supply growth or exchange rates by establishing a nominal anchor for prices. Preventing hyperinflation requires dramatic interest rate hikes, reducing government spending and debt, and raising bank reserve rates, but these steps also carry economic side effects.

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HYPER INFLATION THEORY
Definition for hyper inflation Hyperinflation is inflation that is very high or "out of control", a condition in which prices increase rapidly. usually more than 50% a month.
Causes
An example
Effects
How it can be tamed? • Fiscal deficit must be slashed. • Central bank funding of the reduced deficit ended. • Separating the activities of the central bank from the control of government.
• Controlling of either the money supply or the exchange rate. • Establishment of a ‘nominal anchor’ against which all prices could be measured.
Prevention • Increase the interest rate dramatically. • Cutting government spending and debt. • Increasing reserve rates for banks. But each of these steps might have their own side effects in the economy.
Conclusion
Thank you

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Hyperinflation theory

  • 2. Definition for hyper inflation Hyperinflation is inflation that is very high or "out of control", a condition in which prices increase rapidly. usually more than 50% a month.
  • 6. How it can be tamed? • Fiscal deficit must be slashed. • Central bank funding of the reduced deficit ended. • Separating the activities of the central bank from the control of government.
  • 7. • Controlling of either the money supply or the exchange rate. • Establishment of a ‘nominal anchor’ against which all prices could be measured.
  • 8. Prevention • Increase the interest rate dramatically. • Cutting government spending and debt. • Increasing reserve rates for banks. But each of these steps might have their own side effects in the economy.