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Hyperinflation in Brazil occurred between the first three months of 1990. The monthly inflation rates between January and March 1990 were 71.9%, 71.7% and 81.3% respectively. [ 1 ] As accepted by the International Monetary Fund (IMF), hyperinflation is defined as a period of time in which the average price level of goods and services rise by ...
The Plano Real was based on an analysis of the root causes of hyperinflation in the New Republic of Brazil, that concluded that there was both an issue of fiscal policy and severe, widespread inertial inflation. The Plano Real intended to stabilize the domestic currency in nominal terms after a string of failed plans to control inflation.
In economics, hyperinflation is a very high and typically accelerating inflation. It quickly erodes the real value of the local currency , as the prices of all goods increase. This causes people to minimize their holdings in that currency as they usually switch to more stable foreign currencies. [ 1 ]
History has many examples of ruinous hyperinflation. The most infamous might be that of Weimar Germany, whose hyperinflationary episode is often blamed for the rise of the National Socialists. The
The Cruzado Plan reduced inflation from 12.49% in February 1986 to 1.40% in October of the same year. As a result, the Sarney government became extremely popular, the PMDB elected 53% of the federal deputies and the PFL 24% - providing the administration with a 77% majority in Brazil's federal elections in 1986.
Brazil had suffered through several years of hyperinflation: in 1989, the year before Collor took office, average monthly inflation was 28.94%. [5] The Collor Plan sought to stabilize inflation by "freezing" government liability (such as internal debt) [1] and restricting money flow in order to halt inertial inflation.
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