Logo

Synopsis Hyperinflation and deflation are the two extreme cases of inflation. While a certain amount of inflation is good for the economy, extremes are very harmful. Hyperinflation has been defined as an inflationary situation in which prices move up more than 50% per month, while deflation is a situation where the economy slows down as the inflation rate becomes negative. Hyperinflation takes place when too much money is pumped into the economy and prices move spirally, while deflation is caused by a slowdown of the economy, stagnant demand or a supply side shock. There have been several instances of hyperinflation in the world and the effects have been very bad for the economy. Public lost their trust in the financial system and even governments were toppled. The latest episode has taken place in Zimbabwe. Deflation, on the contrary, has been quite rare, and the most recent examples have been of Japan and the far-eastern countries. This book tries to analyze the causes of inflation, different types of hyperinflation and deflation, main examples of these extreme causes and the steps taken by the central banks of the respective countries to control the same. It covers a long period spanning from the beginning of the twentieth century to the current day, in order to depict the main triggers that gave rise to hyperinflation or deflation in different countries. Several case studies on the subject have also been included to provide a better understanding of the subject.