Hyperinflations may seem to be a problem most countries have learned to avoid.
Latin America has afforded several opportunities to investigate how hyperinflation affects money demand.
The relationship between inflation and the demand for money has been investigated extensively, and several studies have focused on money demand during periods of hyperinflation.
This article reexamines the importance of relative price fluctuations as an explanatory variable for money demand during hyperinflations.
In accordance with the conventional literature, we regard hyperinflations as primarily monetary phenomena.
Casella and Feinstein (1990) and Kuczioski (1923) note the continued use of paper currency to support transactions during the post-WW I German hyperinflation.
During hyperinflations, the spatial dimension of price arbitrage also becomes compressed.
Hyperinflations have never occurred when a commodity served as money or when paper money was convertible into a commodity.
In my experience, as someone who has been involved in stopping 10 of the 57 known hyperinflations, there are two sure-fire ways: instituting a currency board or adopting a foreign currency (dollarization).
Since the hurdle rate to qualify for hyperinflation is 50% per month, Iran registered what appears to be the start of the world's 58th hyperinflation episode.
This account will then form the basis of an historical analysis of the key features that the Zimbabwean episode shares with other past hyperinflations.
When hyperinflations first became a topic of academic and political discussion after the end of the First World War (and the five great hyperinflations that followed it in Germany, Austria, Poland, Hungary and the Soviet Union), the discussion centred on the question of whether hyperinflation was caused by monetary expansion, or by an imbalance in the balance of payments (Fischer et al.