From chronic inflation to hyperinflation: observations on the current situation

Abstract

This article makes a classification of inflation processes. Moderate inflation is
a phenomenon represented by Phillip’s Curve. In chronic inflation, inertial and backward-looking
indexation are major factors. Hyperinflation eliminates backward-looking indexation
and is dominated by expectation and the public factor financial difficulties. It is argued
that although the public inflation factor deficit is not always the primary cause of chronic
inflation, in later stages no government deficit whatsoever can be financed. The lack of alL
sources of public factor financing is what characterizes the transition to hyperinflation. The
current Brazilian scene is analysed.

JEL Classification: E31.