Money Demand and Inflation in Peru, 1979–91

In this essay, Jaime Ventura explores the factors that affected Peruvians’ money demand during a terrible period of hyperinflation and considers whether the government caused the hyperinflation by printing too much money to gain seigniorage revenue. Hyperinflations seem to be a problem most countries have learned to avoid. But many economies have emerged recently whose leaders face tough financial challenges. Generating revenue by overprinting currency to meet fiscal expenses is temptation that some find hard to resist. Now is a goodtime to recollect hyperinflation’s devastating consequences and its causes.