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Recurrent hyperinflations and learning

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  • Albert Marcet
  • Juan P. Nicolini

Abstract

This paper uses a model of boundedly rational learning to account for the observations of recurrent hyperinflations in the last decade. We study a standard monetary model where the fully rational expectations assumption is replaced by a formal definition of quasi-rational learning. The model under learning is able to match remarkably well some crucial stylized facts observed during the recurrent hyperinflations experienced by several countries in the 80's. We argue that, despite being a small departure from rational expectations, quasi-rational learning does not preclude falsifiability of the model and it does not violate reasonable rationality requirements.

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File URL: http://www.econ.upf.edu/docs/papers/downloads/244.pdf
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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 244.

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Date of creation: Nov 1995
Date of revision: Nov 2001
Handle: RePEc:upf:upfgen:244

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Web page: http://www.econ.upf.edu/

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Keywords: Hyperinflations; convertibility; stabilization plans; quasi-rationality;

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References

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  1. Bental, B. & Eckstein, Z., 1995. "A Neoclassical Interpretation of Inflation and Stabilization in Israel," Papers 28-95, Tel Aviv.
  2. Zvi Eckstein & Leonardo Leiderman, 1991. "Seigniorage and the welfare cost of inflation: evidence from an intertemporal model of money and consumption," Discussion Paper / Institute for Empirical Macroeconomics 40, Federal Reserve Bank of Minneapolis.
  3. Marcet, Albert & Sargent, Thomas J., 1989. "Convergence of least squares learning mechanisms in self-referential linear stochastic models," Journal of Economic Theory, Elsevier, vol. 48(2), pages 337-368, August.
  4. Evans, George W & Honkapohja, Seppo, 1995. "Local Convergence of Recursive Learning to Steady States and Cycles in Stochastic Nonlinear Models," Econometrica, Econometric Society, vol. 63(1), pages 195-206, January.
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  7. Marcet, Albert & Nicolini, Juan Pablo, 1998. "Recurrent Hyperinflations and Learning," CEPR Discussion Papers 1875, C.E.P.R. Discussion Papers.
  8. Funke, Michael & Hall, Stephen & Sola, Martin, 1994. "Rational bubbles during Poland's hyperinflation: Implications and empirical evidence," European Economic Review, Elsevier, vol. 38(6), pages 1257-1276, June.
  9. repec:cup:macdyn:v:2:y:1998:i:3:p:287-321 is not listed on IDEAS
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  11. Fudenberg, Drew & Levine, David K., 1995. "Consistency and cautious fictitious play," Journal of Economic Dynamics and Control, Elsevier, vol. 19(5-7), pages 1065-1089.
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  16. 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.
  17. Arifovic, Jasmina & Bullard, James & Duffy, John, 1997. " The Transition from Stagnation to Growth: An Adaptive Learning Approach," Journal of Economic Growth, Springer, vol. 2(2), pages 185-209, July.
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  21. repec:cup:macdyn:v:2:y:1998:i:2:p:156-82 is not listed on IDEAS
  22. Evans, George W. & Ramey, Garey, 1998. "Calculation, Adaptation And Rational Expectations," Macroeconomic Dynamics, Cambridge University Press, vol. 2(02), pages 156-182, June.
  23. Carlos E. Zarazaga, 1993. "Hyperinflations and moral hazard in the appropriation of seigniorage," Working Papers 93-26, Federal Reserve Bank of Philadelphia.
  24. Nicolini, Juan Pablo, 1996. "Ruling out speculative hyperinflations The role of the government," Journal of Economic Dynamics and Control, Elsevier, vol. 20(5), pages 791-809, May.
  25. Bray, Margaret M & Savin, Nathan E, 1986. "Rational Expectations Equilibria, Learning, and Model Specification," Econometrica, Econometric Society, vol. 54(5), pages 1129-60, September.
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  1. [??]A prophecy that misread could have been...
    by himaginary in himaginaryの日記 on 2012-11-05 08:00:00
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