Question

When experiencing hyperinflation, how is counter-trade used by a country to pay its external liabilities?

Answer 1

The hyperinflation rate occurs when the rate of rate of inflation is high and it might go as high as the 50 %.

Hyperinflation renders the currency useless. Economic agents are susceptible to accept the currency as the medium of exchange. Thus a country can use the strategy of counter trade to get engaged in the trading activities. Under the counter trading activities, the goods and services are exchanged for the goods and services.

Thus counter trading activities are followed by the developing countries as well. Developing countries are always running short of foreign exchange , thus these countries make the trade though the policy of counter trade.