Hyperinflation in the Worldwide Economy

2249 WordsFeb 26, 20189 Pages
I. Introduction Hyperinflation, the term can be easily understood by its prefix and foot, the high-strung high index of inflation economics circumstances. According to Cagan, a famous economist, the definition of hyperinflation is when the inflation rate is greater than 50 percent monthly and lasts for more than one year, it can defined as hyperinflation. For example, a dollar item in January cost 130 dollars in the next year of January. Throughout history, there are many examples of hyperinflation worldwide. By looking through the data, Taiwan’s hyperinflation is not as serious as other countries, such as Germany, Hungary and Russia. However, the Taiwanese experience hyperinflation for a very long time, 42 months from January 1946 to June 1949, when compared to other countries. Before further discussion in this paper, the general background about Taiwan’s hyperinflation should be provided. After World War II, Taiwan and mainland China faced the civil war. Acceleration in increasing money supply leads to the problem of depreciation, therefore, hyperinflation came about in 1945. Later, by facing the hot money from the mainland, the Bank of Taiwan, authorized by nationalist government to issue new currency, decreased the effect from this bad hyperinflation situation. The war kept going and Taiwan’s economics still had a difficult time. Finally, the government implemented a stabilization program, such as gold savings deposit program, and the U.S. aid, hyperinflation in Taiwan

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