The 1985 hyperinflation stabilization, among the most severe on record

Bolivia's inflation chart for the early 1980s captures what economic historians rank as the seventh-worst hyperinflation of the 20th century. High inflation began in 1982 as the government, cut off from foreign credit, monetized growing fiscal deficits rooted in the collapse of tin prices and a shrinking, narrow export base; by Cagan's standard definition, true hyperinflation ran from April 1984 to early September 1985, 17 months in which prices rose by a factor of 623 and the average monthly inflation rate reached 46%. Six separate stabilization attempts between late 1982 and mid-1985 all failed before the government of Víctor Paz Estenssoro, in Supreme Decree 21060 of August 29, 1985, imposed a sweeping orthodox program: a unified, freely convertible exchange rate, the elimination of price controls, and firm limits on money creation. The results were dramatic and fast: within roughly seven months annual inflation measured from March 1986 to March 1987 had fallen to about 21%, equivalent to a 1.6% average monthly rate, a collapse later studied by the economist Juan Antonio Morales, who went on to serve as president of the Banco Central de Bolivia.