In the coming week, you will hear a lot of news about how high the price is and how much turkey dinner is more expensive than a year ago. But when you hear someone say the word “hyperinflation”, remember this picture:
figure 1: The monthly CPI headline inflation rates of the United States (blue), Brazil (light green), and Russia (red) are all expressed as percentages. Cagan’s definition of hyperinflation (the red dotted line is 50%). Source: BLS through FRED, Ha, kose, don’t care, And the author’s calculations.
What about the frequently cited example from Germany in the 1920s? We did not use a basket of consumer goods to measure the inflation rate, but we do have a devaluation rate of the Deutsche Mark to the “gold” mark:
figure 2: The monthly depreciation of the Reichsmark relative to the “golden” mark (blue dots and lines). All observations in 1923 are approximate, because the data are related to the number of days in each month. Cagan’s definition of hyperinflation (the red dotted line is 50%). source: WC Fisher/Wikipedia, And the author’s calculations.
