Economists usually follow description that
hyperinflation occurs when the monthly
inflation rate exceeds 50%.
hyperinflation occurs when a country
experiences very high, accelerating, and
perceptibly "unstoppable" rates of inflation. In
such a condition, the general price level within
an economy rapidly increases as the currency
quickly loses real value.
Hyperinflation is often associated with wars, their
aftermath, socio-political upheavals, or other
crises that make it difficult for the government to
tax the population, as a sudden and sharp
decrease in tax revenue coupled with a strong
effort to maintain the status quo can be a direct
trigger of hyperinflation.
Hyperinflation sees a rapid and continuing
increase in the supply of money, and the cost of
Velocity of Money.
Supply and Demand of Money.
Complexity of Economies.
Cost of Hyperinflation
• There are three important costs related to
hyperinflation are as following.
• Shoeleather Cost.
• Menue Cost.
• Result from Tax Law.
• Cost of inconvenience living in world.
Shoe leather cost
• Shoe leather cost refers to the cost of time and effort (more
specifically the opportunity cost of time and energy) that
people spend trying to counter-act the effects of inflation, such
as holding less cash and having to make additional trips to
• The term comes from the fact that more walking is required
(historically, although the rise of the Internet has reduced it) to
go to the bank and get cash and spend it, thus wearing out
shoes more quickly.
• A significant cost of reducing money holdings is the additional
time and convenience that must be sacrificed to keep
less money on hand than would be required if there were less
or no inflation.
• menu cost is the cost to a firm resulting from
changing its prices. The name stems from the cost of
restaurants literally printing new menus, but
economists use it to refer to the costs of
changing nominal prices in general.
• In this broader definition, menu costs might include
updating computer systems, re-tagging items, and
hiring consultants to develop new pricing strategies
as well as the literal costs of printing menus.
Examples of hyperinflation
• Armenia experienced high inflation and hyperinflation
from January 1992-December 1994. Its first episode of
hyperinflation was due to the use of the Russian
ruble after the dissolution of the Soviet Union. The
second episode was due to an unstable Armenian
• (1) Start and End Date: Jan. 1992- Feb. 1993
• (1) Peak Month and Rate of Inflation: Jan. 1992, 73.1%
• (2) Start and End Date: Oct. 1993- Dec. 1994
• (2) Peak Month and Rate of Inflation: Nov. 1993, 438%
• Germany went through its worst inflation in 1923. In 1922, the
highest denomination was 50,000 Mark. By 1923, the highest
denomination was 100,000,000,000,000 Mark. In December 1923
the exchange rate was 4,200,000,000,000 Marks to 1 US dollar.
• In 1923, the rate of inflation hit 3.25 × 106 percent per month
(prices double every two days). Beginning on 20 November 1923,
1,000,000,000,000 old Marks were exchanged for 1 Renten mark so
that 4.2 Renten marks were worth 1 US dollar, exactly the same rate
the Mark had in 1914.
• (1) Start and End Date: Jan. 1920- Jan. 1920
• (1) Peak Month and Rate of Inflation: Jan. 1920, 56.9%
• (2) Start and End Date: Aug. 1922- Dec. 1923
• (2) Peak Month and Rate of Inflation: Nov. 1923, 29,525%