About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

12 Const. Pol. Econ. 3 (2001)

handle is hein.journals/constpe12 and id is 1 raw text is: ld Constitutional Political Economy, 12, 3-12, 2001. I © 2001 Kluwer Academic Publishers. Printed in The Netherlands. Monetary Constitution, Political-Economic Regime, and Long-Term Inflation PETER BERNHOLZ peter.bernholz @unibas.ch Prof em., Dr, Postfach, CH-4003 Basel, Switzerland Abstract. Empirical data about inflation in different countries for about two hundred years since 1800 demon- strate the importance of monetary regimes or constitutions as to the long-term inflationary bias of the respective currencies. Regimes binding the hands of government are less inflation-prone than others. This empirical fact is a consequence of political competition inducing governments to favor inflationary monetary policies. JEL classification: E5, F4, HI, H6, NI P1 Keywords: Inflation, government, deficit monetary regime 1. Introduction In an article (2000) for the leading Swiss newspaper, the Neue ZiircherZeitung, entitled Ein Jahrhundert der Hochinflationen (A Century of High Inflations) I pointed out that never during human history had there been as many and as extreme hyperinflations than in the twentieth century, that is since 1914 (cf. Siklos, 1994). Since this fact is quite in contrast to the experiences of the ninteenth century, our ancestors would have never believed that such events would be possible and would have considered them to be a relapse into barbarism. It may thus be rewarding to look at the empirical facts and to try to find the reasons for such developments. 2. Historical Facts Let me state first that at least twenty-six hyperinflations have taken place during the twentieth century (Table 1). According to the definition by the American economist Philipp Cagan of the 1950s a hyperinflation is present, if the rate of inflation per month exceeds 50 percent for at least one month. These 50 percent per month correspond, according to the rules of computing compound interest, to an annual rate of inflation of 12,874.63 percent. To these hyperinflations have to be added many other high inflations with similar qualitative characteristics, which were not experienced in the nineteenth century, and some of which lasted several decades. As examples the inflations which were taking place in Israel, Argentina, Brazil, and Peru in the seventies and eighties or the Russian inflation of the nineties may be mentioned. The largest hyperinflation of all times occurred in Hungary in 1945/46, the second largest in Serbia 1992/93. The monthly rates of inflation during these episodes exceed normal human understanding. But for Hungary daily rates of inflation are available for the last

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most