Inflation, Hyperinflation, Monetary policy

Hyperinflation is an economic term, which in accordance with the classic definition of year 1956 done by Philip Cagan (1956) is an average of 50 per month escalation of prices this translates into per year rate of inflation of 12,875 (compound rate). An example of a country that has fitted that criterion in the past is Bolivia and this happened in year 1985. Hyperinflation is fundamentally a quick, severe inflation levels that result to a main devaluation of an economys currency. This has happened to Brazil, Argentina and Bolivia in the past as Swanson says in his book. (Swanson, 2004) If this definition of hyperinflation by economists is anything to go by, then any commodity which has a price of USD1 at the starting of the year would cost USD130 at the setting in of the following year.