Indeterminacy of Equilibria in a Hyperinflationary World: Experimental Evidence
The authors design and study an OLG experimental economy where the government finances a fixed real deficit through seigniorage. The economy has continua of nonstationary rational expectations equilibria and two stationary rational expectations equilibria. The authors do not observe nonstationary rational expectations paths. Observed paths tend to converge close to, or somewhat below, the low inflation stationary state. The adaptive learning hypothesis is consistent with the data in selecting the low inflation stationary state rational expectations equilibrium as a long-run stationary equilibrium. Nevertheless, simple adaptive learning models do not capture the market uncertainty or the biases observed in the data. Copyright 1993 by The Econometric Society.
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Volume (Year): 61 (1993)
Issue (Month): 5 (September)
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- Lim, Suk S & Prescott, Edward C & Sunder, Shyam, 1994. "Stationary Solution to the Overlapping Generations Model of Fiat Money: Experimental Evidence," Empirical Economics, Springer, vol. 19(2), pages 255-277.
- Bruno, Michael, 1989. "Econometrics and the Design of Economic Reform," Econometrica, Econometric Society, vol. 57(2), pages 275-306, March. Full references (including those not matched with items on IDEAS)
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