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United International University

Assignement-01

Submitted To

Nushrat Islam

Course Instructor

United International University

Submitted By

Syed Md. Moshiur Rahman

Id No. : 111 122 058

Course: usiness Statistics!2

Course code: S"!221#

Section: $


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A Report on Hyperinflation:

Example from History


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Introduction:

An economic condition most often seen in third-world countries or emerging economies is when

inflation is extremely high and increasing at a rapid pace that is called Hyperinflation.

Hyperinflation is an economic concept that can be defined two different ways, both of which

mean the same thing. A very high rate of inflation , especially sustained over a long period of

time. hile there is no set numeric definition, it is associated with inflation percentages in the

millions and billions. Hyperinflation is almost always caused by poor monetary policy on the

part of the government. Hyperinflation occurs when a country experiences very high and usually

accelerating rates of inflation , rapidly eroding the real value of the local currency , and causing

the population to minimi!e their holdings of the local money. "he population normally switches

to holding relatively stable foreign currencies. #nder such conditions, the general price level

within an economy increases rapidly as the official currency $uic%ly loses real value.

Hyperinflations are usually caused by large persistent government deficits financed primarily by

money creation .

History of Hyperinflation:

Hyperinflation and declining value have been features of fiat currencies since their inception in

&hina about a millennium ago. Hyperinflation is a new mutated version of this ancient terror,

born in the '(th &entury. "he most famous example wor%ed its horrors during the eimar

Republic period in )ermany. *n + '+ a dollar was worth about ( )erman ar%s/ by the end of

+ '0 the exchange rate was 1.' trillion ar%s for a dollar. 2nerous demands by the 3ritish for

war reparations forced the )erman government essentially to pay with the futures of its citi!ens.

*n + 4, 5hillip &agan wrote "he onetary 6ynamics of Hyperinflation, the boo% often

regarded as the first serious study of hyperinflation and its effects 7though 8"he Economics of

*nflation8 by &. 3resciani-"urroni on the )erman hyperinflation was published in *talian in

+ 0+. *n his boo%, &agan defined a hyperinflationary episode as starting in the month that the

http://financial-dictionary.thefreedictionary.com/Inflationhttp://financial-dictionary.thefreedictionary.com/Inflationhttp://financial-dictionary.thefreedictionary.com/Monetary+Policyhttp://financial-dictionary.thefreedictionary.com/Monetary+Policyhttps://en.wikipedia.org/wiki/Inflationhttps://en.wikipedia.org/wiki/Real_versus_nominal_value_(economics)https://en.wikipedia.org/wiki/Real_versus_nominal_value_(economics)https://en.wikipedia.org/wiki/Currencyhttps://en.wikipedia.org/wiki/Price_levelhttps://en.wikipedia.org/wiki/Money_creationhttps://en.wikipedia.org/wiki/Money_creationhttps://en.wikipedia.org/wiki/Phillip_D._Caganhttp://financial-dictionary.thefreedictionary.com/Monetary+Policyhttps://en.wikipedia.org/wiki/Inflationhttps://en.wikipedia.org/wiki/Real_versus_nominal_value_(economics)https://en.wikipedia.org/wiki/Currencyhttps://en.wikipedia.org/wiki/Price_levelhttps://en.wikipedia.org/wiki/Money_creationhttps://en.wikipedia.org/wiki/Phillip_D._Caganhttp://financial-dictionary.thefreedictionary.com/Inflation


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Hyperinflation may as well affect the economy of a country, due to lac% of central ban%s. 2wing

to lac% of central ban%s, the process of 8independent ban%ing8 goes on within the country full-

fledged.

"he main causes are happen in Hyperinflation:

i. ?upply shoc%s

ii. oney supply

iii. odels

Hyperinflation: Why does this matter now?

"his matters now because the new administration is going to @moneti!e the debt. "hey are

going to create new money in order to bail out various ban%s and businesses and even mortgage

debtors. 3ut again, governments may be able to create money, but they cannot create purchasing

power. *t s a swindle. "he money they create dilutes the value of that already in existence. *t is a

way to siphon purchasing power from those trusting souls who have saved in the currency. *t s an

indirect and subtle tax. "his is wrong in principle and disastrous in practice.

Economic Situation of Hyperinflation Shown in Graph:


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E ample of Hi!h Inflation

"he high hyperinflation describe under the below:

Ira":

hile many Asian nations battle stubbornly rising prices, *ra$ offers an example of the extreme

hyperinflation. *n countries experiencing hyperinflation, the central ban%s often falls into a

vicious cycle - printing money in larger and larger denominations as smaller denomination notes

become worthless. 2ne way to avoid the use of large numbers is by declaring a new unit of

currency. 3etween +


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demand, too much supply, businesses put up prices to recoup losses, reparations, printed money

devalued.

)ata collection:

"he analysis is carried out using panel data with three countries 7*ra$, Romania L orth Iorea

examined over a "hirty three year period 7+


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particularly important for developing countries such as those studied, where cases of

hyperinflation are most li%ely to occur.

#eferences:

www.google.comwww.econlib.orgHyperinflation: causes, cures 3ernard ufute, '(+1-+(-'',Hungary: 5ostal history M Hyperinflationhttp:CCwww.mayoclinic.orghttps:CCen.wi%ipedia.orgCwi%iCHyperinflation

http://www.google.com/http://www.econlib.org/https://web.archive.org/web/20080408131232/http:/www.fingaz.co.zw/fingaz/2003/October/October2/1365.shtmlhttp://heindorffhus.motivsamler.dk/shoebox/frame-HungaryInflation02.htmhttp://www.mayoclinic.org/http://www.google.com/http://www.econlib.org/https://web.archive.org/web/20080408131232/http:/www.fingaz.co.zw/fingaz/2003/October/October2/1365.shtmlhttp://heindorffhus.motivsamler.dk/shoebox/frame-HungaryInflation02.htmhttp://www.mayoclinic.org/


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