A hyperinflation occurs when price indexes of broadly defined baskets of goods increase at extremely high rates. As such, hyperinflations are rare. However, the few known cases share many things in common. First, they can occur only in paper currency systems that are not pegged by the central bank to any good. Second, they occur when the quantity of paper currency also grows at extremely high rates. Finally, the force behind the process is always a fiscal imbalance that is financed by issuing currency.
KeywordsBretton Woods system Budget deficits Commodity money Convertibility Fiat money Fisher, I. German hyperinflation Gold standard Hyperinflation Inflation Laffer curve Paper money Price control Price stability Quantity theory of money Seigniorage Stabilization policy Wage control
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