Introduction

Abstract

From 2001 to 2009, Zimbabwe experienced rates of inflation above 100 per cent annually, and from 2006 this rose to over 1500 per cent annually. This book illustrates how ill-conceived domestic policies can lead to hyperinflation and the extensive damage hyperinflation can have at the household, firm and national level. It uses Zimbabwe as a case study. Through also doing a quick review of hyperinflation episodes in other countries, this book highlights that while various pre-conditions to hyperinflation exist, the underlying mechanics of hyperinflation hold across cases. Using a new price series based on a parallel-market rate of foreign currency in Zimbabwe, we show that the large increase in seigniorage revenue was in order to meet the large budget deficit. We also provide evidence that increased money supply, rather than private sector price speculation, is likely to have driven inflation in Zimbabwe.