This research paper looks into the episodes of hyperinflation in Argentine and Brazil, what policies were adopted by these governments and what are the lasting effects of hyperinflation. Both the countries successfully dealt with the situation by bringing in radical reforms…
Download file to see previous pages...
The period of the relatively high level of inflation lasted for about 15 years i.e. from 1980 to 1994 and resulted in significant political, economic as well as a social crisis for the country. One of the key reasons for this hyperinflation in the country was the creation of money supply to finance fiscal expenditure of the country. Government rather than using the taxes or borrowing started to created new money and hence the creation of money supply. During the 1990s, consumer price index ran into the factor of over 5 trillion thus indicating the overall severity of the inflation faced by the country. Argentine also faced the similar situation during the 1990s however, the consistent increase in inflation lasted from 1975 to early 1990s. during that period the overall value of Argentine’s Peso went down and the country introduced massive changes and reforms in the 1990s to initiate the process of recovery. Hyperinflation in Brazil Brazil was a case of chronic inflation which finally turned into hyperinflation and resulted in serious damage for the country. The key reason for this hyperinflation was the excessive creation of money to finance the expansion projects of the government. Rather than relying on the borrowing or improving tax collection, the government simply resorted to printing new money thus creating excessive money supply in the country. At the start of 1990, the consumer price index in the country was to the factor of 100 Million which reached to over 5 trillion by the end of 1997. Such sharp and abnormal increase in the level of consumer price index sustained for almost a decade and proved detrimental to the overall economic future of the country. It is, however, critical to note that the 1990s were the period during which the overall rate of inflation started to moderate owing to strict reforms being undertaken by the government. Since Brazil was facing higher episodes of inflation since the 1970s, therefore, 1990s was the period during which country started to take measures to arrest such trends. (Barbosa, Cunha, and Elvia,183 ) At the start of the 1990s, the rate of inflation was over 30,000% however, it gradually started to decline and reached a level of 16% in 1997. As discussed above, this was a period of relatively important reforms undertaken by the country which resulted in sharp decline in the hyperinflation and economy started to witness the relatively moderate level of inflation rates. (Samuels,547) During this period, saving rates were almost negative as people continued to spend their cash due to the fact that its value was being eroded rapidly. Interest rates soared to a relatively high level in order to reduce the inflation and people who were already suffering from high inflation rates were forced to face higher interest rates also. It is, however, critical to note that the real GDP during the period remained at stagnant levels due to better agriculture output as well as a consistent increase in population during the decade. A real high level of hyperinflation affected the real incomes of the households as the consistent increase in inflation eroded the purchasing power of the individuals.
...Download file to see next pagesRead More
Cite this document
(“Brazil and Argentina Hyperinflation Experience at the Beginning of the Research Paper”, n.d.)
Retrieved from https://studentshare.org/macro-microeconomics/1404027-both-brazil-and-argentina-experienced
(Brazil and Argentina Hyperinflation Experience at the Beginning of the Research Paper)
“Brazil and Argentina Hyperinflation Experience at the Beginning of the Research Paper”, n.d. https://studentshare.org/macro-microeconomics/1404027-both-brazil-and-argentina-experienced.
ne of the most crucial factors that determine the structure of a particular country’s economy. At the present age all the developed as well as developing nations from all over the world compete with each other in terms of socio-economic development and FDI plays a decisive role in this competition.
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 economy’s currency. This has happened to Brazil, Argentina and Bolivia in the past as Swanson says in his book.
Furthermore, Brazil is five times larger in real GDP than Argentina. Economic indicators used include availability of natural resources, Gross Domestic Product (GDP), unemployment rates, budget, inflation rate, international trade, exchange rate regime, interest rates, sectors, country’s investment and energy.
However, true formation of the Argentinean nation began after their independence that was a period marred with civil wars. It was during this time that Juan Manuel de Rosas came into power. He was born into a family that had wealth and power (Sarmiento, Mann & Stavans 7).
The country so chosen to explain and analyze a macroeconomic scenario during hyperinflation is Argentina. Argentina, because it is a country that tops the list in hyperinflation during the 20th century. The country has had periods of hyperinflation and controlled inflation and recoups after these bouts.
“The Monetary Dynamics of Hyperinflation” authored by Cangan in 1956 is regarded as one of the earliest serious studies on hyperinflation and its impact. In this study, he denoted hyper inflation as the minimum 50% monthly inflation rate (Cangan, “The Monetary
cial vice in the 19th Century, this paper borrows from the novel by Gold who narrates the struggles of women to earn their dignity and respect in early America through the life story of a Chinese girl, Lalu Nathoy, referred by the father as ‘thousand pieces of gold’, just as
The government has been at the forefront in offering incentives to the investors in terms of loans or free tax zones to encourage investment (Diniz, 2014).
Brazil is one of the leading green energy producers in