DEFINITION of 'Hyperdeflation'

An extremely large and relatively quick level of deflation in an economy. Hyperdeflation occurs when the general price level of goods or services in an economy falls drastically in a short period of time, causing the real value of a currency to actually increase in that time. This increase results in debts being more pronounced as the real value increases and the value of the currency falls.

BREAKING DOWN 'Hyperdeflation'

While there are no official definitions of what price levels must fall to and how quickly for deflation to be defined as hyperdeflation, generally hyperdeflation can lead to a deflationary spiral in which a deflationary environment leads to lower production, lower wages and demand, and thus lower price levels, continuing until an outside force (government for example) steps in.