Capital flight and hyperinflation

Episode number 9 of Series “The Global Economy”.
This episode of the Open Learning Economics course continues to examine the dynamics of currency exchange on international financial markets. Inflation and interest rates play a pivotal role in determining the strength or weakness of a national currency on the global market. An increase in the inflation rate within a country can precipitate a crisis in which national currency is converted into other currencies for investment and therefore leaves the country. The program examines two specific examples of “capital flight”: the 1982 Currency crisis in Mexico when the Mexican government announced that it could not afford to pay interest on its foreign debt; and the 1989 inflation disaster in Argentina when inflation rates rose to such an uncontrollable extent (up to 200% a month) that the economy collapsed and the peso became valueless. A panel of economists analyse how finanical policy in regard to inflation, interest rates and currency exchange can lead to such economic failure.