The Death of High Inflation

[phantom power]

I did a quick calculation using the IMF’s World Economic Outlook Database, which runs back to 1980. Year by year, how many countries had triple digit inflation in any given year? It looks like this:



Basically, there was a wave of hyperinflations caused by the chaos following the breakup of the Soviet Empire, much like the wave after World War I; since then, Zimbabwe and nobody else.

Even double-digit inflation has become quite rare:



There’s a brief spike around 2008; if you look at it, it turns out to be mainly small commodity-exporting countries pushed into big devaluations by the crisis, leading to one-time jumps in consumer prices. But then it was back to the downward trend.

There are, I think, a couple of morals here. One is that economics textbooks probably talk too much about high inflation; it’s a nice pedagogical set-piece, but not something that’s a real issue in today’s world. Another is that high inflation doesn’t happen just because a country’s rulers are spendthrifts or don’t know about the Emperor Diocletian or something; it is always associated with severe political and social disruption. To stand Milton Friedman on his head, high inflation is never and nowhere a merely monetary phenomenon.

http://krugman.blogs.nytimes.com/2013/07/23/the-death-of-high-inflation/

[Demeter]

1. Well, yes

Oil shock inflation, precious metal shock inflation, food shock inflation....economic sanctions inflation...war inflation....natural disaster disrupting production and distribution inflation....

NEVER NEVER NEVER labor shortage inflation, though....

Dr. Krugman could have mentioned that....

[annasmith]

2. wow nice work

Never looked at the data from this perspective before.

In 2012, 27 countries had double digit inflation according to the cia, but this is still pretty close to the IMF data