The Hungarian Hyperinflation and Stabilization of 1945-1946

Abstract

Inflation in Hungary after World War II was the most intense on record. The reforms of August 1946 were immediately and entirely successful in stabilizing prices. This paper describes and analyzes the unique policies and institutions that produced these phenomena. Despite its severity, the Hungarian experience was consistent with the less extreme inflation and stabilization experiences examined by Sargent. Price stabilization was accomplished by fiscal rather than purely monetary measures and was, paradoxically, accompanied by rapid and prolonged money growth.