Generally, when we think about inflation, a very first thing that comes in our minds is increase in prices but we don’t think of increase in liquid money that is circulating in the country which can be a main reason of pulling demand to high level and as result prices goes up. Limited inflation is perfect for the smooth growth of the country if it is below 10% but too high rate of inflation is most hazardous that decline confidence in currency ceasing foreign investors to invest in the country concerned. Countries with highest inflation may face recession in the near future and painful readjustment is required to avoid any disaster of economy such as higher interest rates and deflationary fiscal policy. If inflation gets too high, a country’s central bank in most cases gets involved by elevating its interest rates and thus stopped the injection of money in economic cycle.
Highest rate of inflation reduces foreign direct investment and also makes the country’s exports more costly in international market which leads to lower growth. A highest inflation rate endangers a country’s economic stability and the well-being of its society that not only decreases purchasing power of private and public savings but also erodes value of real assets. If wages rises less rapidly than prices then the value of money also falls. Extremely high inflation rate adversely affect country’s exchange rates with other nations and also suppress investment since volatile inflation generates uncertainty about future prices and costs that make investors doubtful and end up in lower long term growth.
Growth in GDP plays a positive part in stock market performance but too much GDP growth is also fatal, as it will be a result of high inflation. There are number of factors that produce highest rate of inflation in the country such as increase in local demand, increase in domestic costs, as wages and external sources, as oil price increases. Normally inflation as measured by the core Consumer Price Index (CPI). Listed below are top 20 countries which had highest rate of inflation in 2014, according to CIA factbook.
|Country||Consumer Price Index 2014||Consumer Price Index 2013|
|Central African Republic||9.0%||1.5%|
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