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Are Hyperinflationary Paths Learnable?

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Author Info

  • Klaus Adam

    (University of Frankfurt)

  • George W. Evans

    () (University of Oregon Economics Department)

  • Seppo Honkapohja

    (University of Helsinki)

Abstract

Earlier studies of the seigniorage inflation model have found that the high-inflation steady state is not stable under adaptive learning. We reconsider this issue and analyze the full set of solutions for the linearized model. Our main focus is on stationary hyperinflationary paths near the high-inflation steady state. The hyperinflationary paths are stable under learning if agents can utilize contemporaneous data. However, in an economy populated by a mixture of agents, some of whom only have access to lagged data, stable inflationary paths emerge only if the proportion of agents with access to contemporaneous data is sufficiently high.

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File URL: http://economics.uoregon.edu/papers/UO-2003-31_Evans_Stationary_Paths.pdf
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Bibliographic Info

Paper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number 2003-31.

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Length: 27
Date of creation: 17 Mar 2003
Date of revision: 22 Apr 2005
Handle: RePEc:ore:uoecwp:2003-31

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Keywords: inflation; stability of equilibria; seigniorage;

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References

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  1. Evans, George W & Honkapohja, Seppo & Marimon, Ramon, 1996. "Convergence in Monetary Inflation Models with Heterogeneous Learning Rules," CEPR Discussion Papers 1310, C.E.P.R. Discussion Papers.
  2. Klaus Adam, 2003. "Learning and Equilibrium Selection in a Monetary Overlapping Generations Model with Sticky Prices," CFS Working Paper Series 2003/03, Center for Financial Studies.
  3. Sargent, Thomas J., 1991. "Equilibrium with signal extraction from endogenous variables," Journal of Economic Dynamics and Control, Elsevier, vol. 15(2), pages 245-273, April.
  4. Ramon Marimon & Shyam Sunder, 1993. "Indeterminacy of equilibria in a hyperinflationary world: Experimental evidence," Economics Working Papers 25, Department of Economics and Business, Universitat Pompeu Fabra.
  5. Fischer, Stanley, 1984. "The economy of Israel," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 20(1), pages 7-52, January.
  6. Duffy John, 1994. "On Learning and the Nonuniqueness of Equilibrium in an Overlapping Generations Model with Fiat Money," Journal of Economic Theory, Elsevier, vol. 64(2), pages 541-553, December.
  7. Bruno, Michael, 1989. "Econometrics and the Design of Economic Reform," Econometrica, Econometric Society, vol. 57(2), pages 275-306, March.
  8. Arifovic, Jasmina, 1995. "Genetic algorithms and inflationary economies," Journal of Monetary Economics, Elsevier, vol. 36(1), pages 219-243, August.
  9. Stanley Fischer, 1984. "The Economy of Israel," NBER Working Papers 1190, National Bureau of Economic Research, Inc.
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Cited by:
  1. James B. Bullard, 2006. "The learnability criterion and monetary policy," Review, Federal Reserve Bank of St. Louis, issue May, pages 203-217.
  2. Kevin J. Lansing, 2005. "Lock-in of extrapolative expectations in an asset pricing model," Working Papers in Applied Economic Theory 2004-06, Federal Reserve Bank of San Francisco.

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