The Taiwanese Hyperinflation and Stabilization of 1945-1952

During the years 1945-1949, Taiwan experienced a hyperinflation separate from the hyperinflation on the Chinese mainland. The stabilization ultimately implemented by the Chinese Nationalists differed in important ways from the programs that ended the big European inflations. The program was embarked upon with little hope of, or efforts toward, reducing the budget deficit: price stability took three years to achieve and use was made of high (real) yielding bank accounts as an anti-inflation tool. The behavior of key economic variables during the episode raises questions relating to current theories of how economic agents react to regime changes.