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Hyperinflations are extremely rare in countries whose central banks are independent of the rest of the government. Why might this be so?

2006-11-02 14:57:24 · 1 answers · asked by Soccer Stud 2 in Social Science Economics

1 answers

Hyperinflation is usually caused by governments printing money to try and stimulate their economy and make it grow. If the central bank is independent, the central bank controls how much money is printed (ie they control the money supply), so governments can only spend by either raising taxes (which they are more reluctant to do because they will get voted out of office), or by borrowing (but if they borrow and spend too much, lenders will stop lending to them).

Independent central banks usually have a clearly defined objective of controlling inflation and therefore won't just print more money for the government.

2006-11-02 17:23:51 · answer #1 · answered by eco101 3 · 1 0

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