The Lessons to be Learned from the Hyperinflation and Its Termination

Abstract

There continues to be considerable debate about the lessons which can be drawn from episodes of hyperinflation for countries suffering from either chronic or moderate inflations. To what extent can such episodes be treated as a laboratory for the testing of economic theory? Because of the importance of this issue, the present chapter attempts to place the Hungarian experience into its proper context.¹

… it is precisely because the events were so extreme that they are akin to laboratory experiments in which the elemental forces that cause and can be used to stop inflation are easiest to spot. I believe that these incidents are full of lessons about our own, less drastic predicament with inflation, if only we interpret them correctly.

Thomas J. Sargent, Rational Expectations