International Inflation Trends

a domestic event, fomented by domestic factors and/or policies, such as money creation. There is some truth to this in extreme cases. For example, essentially all hyper­ inflations—monthly inflation greater than 40 percent— result from uncontrolled domestic fiscal deficits that are financed by domestic money creation and followed by a self­reinforcing cycle of price rises and increases in the velocity of money. At less­pathological rates of inflation, domestic policies, especially those of central banks, are still important. Even central banks of small, open economies can approximately determine average levels of inflation over periods of at least several years.