Sources of Hyperinflation in Third-World Countries (Essay Sample)
Instructions
USING A TWO-PAGE (550 WORDS) ESSAY, DISCUSS THE UNDERLYING SOURCES OF HYPERINFLATION IN THIRD-WORLD COUNTRIES.
Abstract
DEVELOPING ECONOMIES' HIGH INFLATION RATES EMANATE FROM NUMEROUS L FACTORS, INCLUDING, WITHOUT LIMITATION, MACROECONOMIC CONCEPTS, EXPANSIONARY MONETARY POLICIES, POLITICAL UNRESTS, RAPID URBAN DEVELOPMENT, AND POOR GOVERNANCE.
ECONOMIC RESEARCHERS ATTRIBUTE HIGH INFLATION IN DEVELOPING AND EMERGING COUNTRIES TO MACROECONOMIC FACTORS SUCH AS SUPPLY SHOCKS, MONEY SUPPLY, AND EXCESSIVE BORROWING. MOREOVER, URBANIZATION, POLITICAL INSTABILITY, AND SOCIAL UNREST ARE LEADING FACTORS THAT TRIGGER HYPERINFLATION IN DEVELOPING COUNTRIES.
IN ADDITION, MOST DEVELOPING COUNTRIES DO NOT HAVE INFLATION-TARGETING REGIMES TO MONITOR AND ENHANCE PRICE STABILITY. IN CONSEQUENCE, COUNTRIES WITH WEAK ECONOMIES FAIL TO ADOPT ROBUST INFLATION-TARGETING FRAMEWORKS BECAUSE OF ECONOMIC VULNERABILITIES, LOW COMMERCIAL DEVELOPMENT, AND A LACK OF STABLE INSTITUTIONAL ARRANGEMENTS TO PROMOTE PRICE STABILITY.
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Hyperinflation in Developing Countries
Hyperinflation is a monetary phenomenon that manifests through dwindling real wages, depreciation of the domestic currency, and shrinking economic growth rates. Despite instituting concerted efforts to achieve price stability, hyperinflation remains a central fiscal problem in developing and emerging countries. Nevertheless, since the 1970s, inflation has fallen globally, including in the most affected countries such as Latin America and Sub-Saharan Africa (Chamisa et al. 1242). Developing economies' high inflation rates stem from several factors, including macroeconomic concepts, expansionary monetary policies, political turmoil, urban development, and weak governance.
Economic experts attribute hyperinflation to macroeconomic factors, including supply shock, money supply, and increased borrowing. According to Settle, the mismanagement of money markets by central banks and financial regulatory agencies are the underlying cause of hyperinflation in developing countries (352). The malfunctioning macroeconomic processes
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