In economics, hyperinflation is very high and typically accelerating inflation. It quickly erodes the real value of the local currency, as the prices of all goods increase. This causes people to minimize their holdings in that currency as they usually switch to more stable foreign currencies, in recent history often the US dollar. Prices typically remain stable in terms of other relatively stable currencies.
In economics, inflation is a general rise in the price level of an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy. The opposite of inflation is deflation, a sustained decrease in the general price level of goods and services. The common measure of inflation is the inflation rate, the annualised percentage change in a general price index, usually the consumer price index, over time.
Purchasing power parity (PPP) is a measurement of prices in different countries that uses the prices of specific goods to compare the absolute purchasing power of the countries' currencies. In many cases, PPP produces an inflation rate that is equal to the price of the basket of goods at one location divided by the price of the basket of goods at a different location. The PPP inflation and exchange rate may differ from the market exchange rate because of poverty, tariffs, and other transaction costs.
In finance, an exchange rate is the rate at which one national currency will be exchanged for another. It is also regarded as the value of one country's currency in relation to another currency. For example, an interbank exchange rate of 114 Japanese yen to the United States dollar means that ¥114 will be exchanged for US$1 or that US$1 will be exchanged for ¥114. In this case it is said that the price of a dollar in relation to yen is ¥114, or equivalently that the price of a yen in relation to dollars is $1/114.
The cruzeiro real was the short-lived currency of Brazil between August 1, 1993 and June 30, 1994. It was subdivided in 100 centavos, however, this unit was used only for accounting purposes. The currency had the ISO 4217 code BRR.
Gustavo Henrique de Barroso Franco is a Brazilian economist. Former Governor of the Brazilian Central Bank, is best known for being one of the "fathers" of the Real Plan, the 1994 monetary reform that ended hyperinflation in Brazil. He teaches economics at the Catholic University in Rio de Janeiro since 1986. He is also a businessman, consultant and has served on many boards. He founded Rio Bravo Investimentos where he works as Senior Advisor. He has written several books, academic papers and contributes regularly to newspapers and magazines.
The Argentine Currency Board pegged the Argentine peso to the U.S. dollar between 1991 and 2002 in an attempt to eliminate hyperinflation and stimulate economic growth. While it initially met with considerable success, the board's actions ultimately failed. In contrast to what most people think, this peg actually did not exist, except only in the first years of the plan. From then on, the government never needed to use the foreign exchange reserves of the country in the maintenance of the peg, except when the recession and the massive bank withdrawals started in 2000.
Chronic inflation is an economic phenomenon occurring when a country experiences high inflation for a prolonged period due to continual increases in the money supply among other things. In countries with chronic inflation, inflation expectations become 'built-in', and it becomes extremely difficult to reduce the inflation rate because the process of reducing inflation by, for example, slowing down the growth rate of the money supply, will often lead to high unemployment until inflationary expectations have adjusted to the new situation.
The Plano Real was a set of measures taken to stabilize the Brazilian economy in 1994, during the presidency of Itamar Franco. Its architects were led by the Minister of Finance and succeeding president Fernando Henrique Cardoso. The Plano Real was based on an analysis of the root causes of hyperinflation in the New Republic of Brazil, that concluded that there was both an issue of fiscal policy and severe, widespread inertial inflation. The Plano Real intended to stabilize the domestic currency in nominal terms after a string of failed plans to control inflation.
Inertial inflation is a situation in which all prices in an economy are continuously adjusted with relation to a price index by force of contracts.
The Collor Plan, is the name given to a collection of economic reforms and inflation-stabilization plans carried out in Brazil during the presidency of Fernando Collor de Mello, between 1990 and 1992. The plan was officially called New Brazil Plan, but it became closely associated with Collor himself, and "Plano Collor" became its de facto name.
The Unidad de Fomento (UF) is a unit of account used in Chile. It is a non-circulating currency; the exchange rate between the UF and the Chilean peso is constantly adjusted for inflation so that the value of the Unidad de Fomento remains almost constant on a daily basis during low inflation. It was created on 20 January 1967, for the use in determining the principal and interest in international secured loans for development, subject to revaluation according to the variations of inflation. Afterwards it was extended to all types of bank loans, private or special financing, purchases and investments on instalments, contracts, and some special situations. It is also used in legal standards such as the par value of stock and capitalization of companies, and fines.
The economic history of Brazil covers various economic events and traces the changes in the Brazilian economy over the course of the history of Brazil. Portugal, which first colonized the area in the 16th century, enforced a colonial pact with Brazil, an imperial mercantile policy, which drove development for the subsequent three centuries. Independence was achieved in 1822. Slavery was fully abolished in 1888. Important structural transformations began in the 1930s, when important steps were taken to change Brazil into a modern, industrialized economy.
Redenomination is the process of changing the face value of banknotes and coins in circulation. It may be done because inflation has made the currency unit so small that only large denominations of the currency are in circulation. In such cases the name of the currency may change or the original name may be used with a temporary qualifier such as "new". Redenomination may be done for other reasons such as changing over to a new currency such as the Euro or during decimalisation.
Inflation accounting comprises a range of accounting models designed to correct problems arising from historical cost accounting in the presence of high inflation and hyperinflation. For example, in countries experiencing hyperinflation the International Accounting Standards Board requires corporations to implement financial capital maintenance in units of constant purchasing power in terms of the monthly published Consumer Price Index. This does not result in capital maintenance in units of constant purchasing power since that can only be achieved in terms of a daily index.
Hyperinflation in Zimbabwe was a period of currency instability in Zimbabwe that, using Cagan's definition of hyperinflation, began in February 2007. During the height of inflation from 2008 to 2009, it was difficult to measure Zimbabwe's hyperinflation because the government of Zimbabwe stopped filing official inflation statistics. However, Zimbabwe's peak month of inflation is estimated at 79.6 billion percent month-on-month, 89.7 sextillion percent year-on-year in mid-November 2008.
Constant purchasing power accounting (CPPA) is an accounting model approved by the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) as an alternative to traditional historical cost accounting under hyper-inflationary environments and all other economic environments. Under this IFRS and US GAAP authorized system, financial capital maintenance is always measured in units of constant purchasing power (CPP) in terms of a Daily CPI during low inflation, high inflation, hyperinflation and deflation; i.e., during all possible economic environments. During all economic environments it can also be measured in a monetized daily indexed unit of account or in terms of a daily relatively stable foreign currency parallel rate, particularly during hyperinflation when a government refuses to publish CPI data.
The Brazilian real is the official currency of Brazil. It is subdivided into 100 centavos. The Central Bank of Brazil is the central bank and the issuing authority. The real replaced the cruzeiro real in 1994.
Hyperinflation in Brazil occurred between the first three months of 1990. The monthly inflation rates between January and March 1990 were 71.9%, 71.7% and 81.3% respectively. As accepted by the International Monetary Fund (IMF), hyperinflation is defined as a period of time in which the average price level of goods and services rise by more than 50% a month.
Between 1992 and 1994, the Federal Republic of Yugoslavia (FRY) experienced the third-longest period of hyperinflation in world economic history. This period spanned 22 months, from March 1992 to January 1994. Inflation peaked at a monthly rate of 313 million percent in January 1994. Daily inflation was 62%, with an inflation rate of 2.03% in 1 hour being higher than the annual inflation rate of many developed countries. The inflation rate in January 1994, converted to annual levels, reached 116,545,906,563,330 percent (116.546 billion percent, or 1.16 × 1015 percent). During this period of hyperinflation in FR Yugoslavia, store prices were stated in conditional units – point, which was equal to the German mark. The conversion was made either in German marks or in dinars at the current "black market" exchange rate that often changed several times per day.
