It is generally believed that high rates of inflation and hyperinflation are

caused by an excessive growth of the money supple. However, inflation is

not necessarily caused by money supple growth. Based on which factors
determine, there are quite plenty of ways to moderate rates of inflation.
The monetary authorities are usually to keep the rate of inflation low and
stable. These monetary authorities are generally central banks which can
control monetary policy through the setteng of interest rates, through
open market operations, and the setting of banking reverve requirements.
Monetary policy is usually used to control inflation by the central bank. It
is basically about increase the interest rate, slow or stop the growth of the
money supply, and reduce the money supply. Higher rates make
borrowing more expensive and saving more attractive, which lead to
lower growth in consumer spending and investment. A higher interest
rates should also lead to higher exchange rate, which helps to reduce
inflationary presure by making imports cheaper, reducing demand for
exports and increasing incentive for exporters to cut costs. High interst
rates (and slow growth of the money supply) are the traditional way that
central banks fight inflation, using unemployment and the decline of
production to prevent price increases. Some central bank follows a
symmetrical inflation target while others only control inflation when it
rises above target, whether express or implied.
Using fixed exchange rate currency, a countrys regime can somehow
control the inflations rate. The countrys currency is tied in value to
another single currency or to a basket of other currencies (or using gold
as measure of value). Fixed exchange rate will stabilize the value of a
currency. The inflation rate in the fixed exchange rate country is
determined by the inflation rate of the coun try the currency is pegged to.
However, a fixed exchange rate prevents a government from using
domestic monetary policy in order to achieve macroeconomic stability.
Some governments can use gold standard which is a monetary system in
which a region;s common media of exchange are paper notes that are
normally freely convertible into preset, fixed quantities of gold. Except
from above solution, income policies are also generally used. Wage and
price controls have been successful in wartime environments in
combination with rationing. The policies are used by Richard Nixon,
Australia and Netherlends government. Nevertheless, wage and proce
controls are regarded as a temporary and exceptional measure, only
effective when coupled with policies designed to reduce the inderlying
caused of inflation during the wage and price control regime.

If the regime stimulates economic growth enough, and the economic

growth matches the growth of the money supple, inflation should not
occur (when all else is equal). Finally, by adjusting cost of living
allowance and adjusts alaries based on changes in a cost of living
index. It does not control inflation but rather seeks to mitigate the
consequences of inflation for those in fixed incomes.
Come back to the example of hyperinfaltion in Zimbabwe, where the
central bank is called Reverse Bank of Zimbabwe. The government could
declare some foreign currency to be the nation's official currency. It
actually abandoned printing Zimbabwean dollars at all in 2009, which
solved the chronic problem of lack of confidence in the Zimbabwe dollar,
and compelled people to use the foreign currency of their choice. Until
2014, a combination of foreign currencies, mostly US dollars, is used by
Zimbabwe. In 2014, the Reverse Bank of Zimbabwe unveiled centavo
coins in denomications of US$0.01 through US$0.50. 80% of
Zimbabweans use the U.S dollar, according to the RBZ. It also declared
that local lack of coins induces retailers to round prices up to the next
higher dollar. The Bank repeated assurances that it does not intend to
bring back a national currency.
More detail of Zimbabwes solutions to inflation:
Stop printing money
In 2009, the government abandoned printing Zimbabwean dollars. This
temporarily dealt with the dramatic lack of confidence in the Zimbabwean
dollar, and compelled people to use the foreign currency of their choice.
Dollarization
Dollarization occurs when residents of a country extensively use other
foreign, such as US dollar, the Euro alongside, or instead of the
domestic currency. From 2009 through 2014, Zimbabwe is operating a
multiple currency system, mostly the U.S. dollar. The Government
conducts almost all its business using the U.S. dollar and it is the currency
that has become predominant among the other currencies used in the
country. In 2014, the Reserve Bank of Zimbabwe announced that 80% of
Zimbabweans use the U.S. dollar as a statement of trade as well as a
store of value.
Since then there has been a controversial debate over how dollarization
has contributed to the Zimbabwean economy. The main advantage of
dollarization is that hyperinflation has been dramatically stabilized, which
encourages the significant national economic growth. Somehow this

stable currency will attract foreign investors who were previously

reluctant to invest in Zimbabwe due to its economic and monetary
weaknesses. On the other hand, there is also a drawback to dollarization
that the Zimbabwean government could not influence its own monetary
policy by adjusting the money supply.
Joining the Rand zone
Another suggestion to reduce inflation is for Zimbabwe to join the
Common Monetary Area (CMA) known as the Rand zone. The Rand
zone is a formal group of countries that collectively use one currency for
better trade and stability. Zimbabwe could join this union comprised of
Lesotho, South Africa, Namibia by formally deciding to use the rand to
promote trade and stability. A currency union, like the Rand Zone, would
allow openness and encourage the Zimbabwean economy to grow, which
has been destroyed by the hyperinflation.