The conventional marker for hyperinflation is 50% per month, which was first proposed in 1956 by Phillip Cagan, Professor of Economics at Columbia University. Below we review three other historical cases of hyperinflation.
- Hyperinflation is extreme or excessive inflation where price increases are rapid and out of control.
- Most central banks (such as the U.S. Federal Reserve) target an annual inflation rate for a country of around 2% to 3%.
- During periods of hyperinflation, a country experiences an inflation rate of 50% or more per month.
- Venezuela, Hungary, Zimbabwe, and Yugoslavia have all experienced periods of hyperinflation.
Hungary: August 1945 to July 1946
- Highest monthly inflation rate: 4.19 x 1016%
- Equivalent daily inflation rate: 207%
- Time required for prices to double: 15 hours
- Currency: Pengő
While hyperinflation is generally considered to be the result of government ineptitude and fiscal irresponsibility, the hyperinflation of postwar Hungary was apparently engineered by government policymakers as a way to get a war-torn economy back on its feet. The government used inflation as a tax to help with a revenue deficit needed for postwar reparation payments and payments for goods to the occupying Soviet army. Inflation also served to stimulate aggregate demand in order to restore productive capacity.
Zimbabwe: March 2007 to Mid-November 2008
- Highest monthly inflation rate: 7.96 x 1010%
- Equivalent daily inflation rate: 98%
- Time required for prices to double: 24.7 hours
- Currency: Dollar
Yugoslavia: April 1992 to January 1994
- Highest monthly inflation rate: 313,000,000%
- Equivalent daily inflation rate: 64.6%
- Time required for prices to double: 1.41 days
- Currency: Dinar
While hyperinflation has severe consequences, not only for the stability of a nation’s economy but also that of its government and greater civil society, it’s often a symptom of crises that are already present. This situation offers a look at the true nature of money. Rather than being just an economic object used as a medium of exchange, a store of value, and a unit of account, money is far more symbolic of underlying social realities. Its stability and value depend upon the stability of a country’s social and political institutions.