High inflation and hyperinflation: a post-Keynesian view

Abstract

Inflation has become, in the 80’s, the most important barrier to resuming economic
growth in Brazil. A post-Keynesian approach to this problem stresses the effects that
continuing high inflation has on beliefs and institutions, especially the system of money forward
contracts that is fundamental to organize and coordinate an entrepreneurial economy. A
High Inflation Regime is defined by the introduction of new monies-of-account for forward
contracts, that is, indexation, and by a change in the modes of price formation. It is shown that
High Inflation characterizes an unstable equilibrium that may degenerate into hyperinflation.
The permanence of high inflation, however, may engender stagnating tendencies.

JEL Classification: E31