FTER World War I, a handful of European economies succumbed to hyperinflation. Austria,

up enormous price increases, with Germany recording an astronomical 3.25 million percent in a single month in 1923. But, since the 1950s, hyperinflation has been confined to the developing world and the transition economies. The milder problem of chronic high inflation ceased to be a problem in the advanced economies in the 1980s and in the developing countries in the 1990s (Chart 1). In Latin America and the Caribbean, the average rate of infla-tion dropped from 233 percent a year in 1990–94 to 7 percent in 2000–02. In the transition economies, the decline over the same period was even greater, from 363 percent to 16 percent. And, in developing Asia, always a low-inflation region by developing country standards, inflation has recently stabilized at about 5 percent a year. The benign inflation environment of recent years may lea