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Global Bifurcations, Credit Rationing and Recurrent Hyperinflations

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  • Pere Gomis-Porqueras
  • Àlex Haro

Abstract

This paper proposes an alternative explanation to recurrent hyperinflations other than bounded rationality by explicitly considering the global dynamics of an economy with credit market frictions. In this paper we show that hyperinflations are self-generated and are manifestations of the underlying global dynamic properties of an economy with perfect foresight rational agents that face credit rationing. Moreover, we found that economies that are more credit constrained are more likely to experience recurrent hyperinflations.

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Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 239.

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Date of creation: Dec 2005
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Handle: RePEc:bge:wpaper:239

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Keywords: Nonlinear Dynamical Systems; Global Dynamics;

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References

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  1. Marcet, A. & Nicolini, J.P., 1997. "Recurrent Hyperinflations and Learning," Papers, Centro de Estudios Monetarios Y Financieros- 9721, Centro de Estudios Monetarios Y Financieros-.
  2. Williamson, Stephen D., 1986. "Costly monitoring, financial intermediation, and equilibrium credit rationing," Journal of Monetary Economics, Elsevier, Elsevier, vol. 18(2), pages 159-179, September.
  3. Pintus, Patrick & Sands, Ducan & De Vilder, Robin, 1996. "On the transition from local regular to global irregular fluctuations," CEPREMAP Working Papers (Couverture Orange) 9617, CEPREMAP.
  4. William A. Brock & Cars H. Hommes, 1997. "A Rational Route to Randomness," Econometrica, Econometric Society, Econometric Society, vol. 65(5), pages 1059-1096, September.
  5. de Vilder, Robin, 1996. "Complicated Endogenous Business Cycles under Gross Substitutability," Journal of Economic Theory, Elsevier, Elsevier, vol. 71(2), pages 416-442, November.
  6. Beatrix Paal, 2000. "Destabilizing effects of a successful stabilization: a forward-looking explanation of the second Hungarian hyperinflation," Economic Theory, Springer, Springer, vol. 15(3), pages 599-630.
  7. Bental, B. & Eckstein, Z., 1988. "The Dynamics Of Inflation With Constant Deficit Under Expected Regime Change," Papers, Tel Aviv 35-88, Tel Aviv.
  8. Gomis-Porqueras, Pere & Haro, Alex, 2003. "Global dynamics in macroeconomics: an overlapping generations example," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 27(11), pages 1941-1959.
  9. Evans, Jean Lynne & Yarrow, George Keith, 1981. "Some Implications of Alternative Expectations Hypotheses in the Monetary Analysis of Hyperinflations," Oxford Economic Papers, Oxford University Press, vol. 33(1), pages 61-80, March.
  10. Bruce D. Smith & John H. Boyd, 1998. "Capital market imperfections in a monetary growth model," Economic Theory, Springer, Springer, vol. 11(2), pages 241-273.
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Citations

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Cited by:
  1. Anna Agliari & George Vachadze, 2011. "Homoclinic and Heteroclinic Bifurcations in an Overlapping Generations Model with Credit Market Imperfection," Computational Economics, Society for Computational Economics, Society for Computational Economics, vol. 38(3), pages 241-260, October.
  2. Peter Bernholz & Peter Kugler, 2009. "The Success of Currency Reforms to End Great Inflations: An Empirical Analysis of 34 High Inflations," German Economic Review, Verein für Socialpolitik, Verein für Socialpolitik, vol. 10, pages 165-175, 05.
  3. Gomis-Porqueras, Pere & Haro, Àlex, 2009. "A geometric description of a macroeconomic model with a center manifold," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 33(6), pages 1217-1235, June.
  4. Foroni, Ilaria & Agliari, Anna, 2011. "Complex dynamics associated with the appearance/disappearance of invariant closed curves," Mathematics and Computers in Simulation (MATCOM), Elsevier, Elsevier, vol. 81(8), pages 1640-1655.
  5. Alex Haro & Pere Gomis-Poruqeras, 2004. "Computing Center Manifolds: A Macroeconomic Example," Computing in Economics and Finance 2004, Society for Computational Economics 38, Society for Computational Economics.

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