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The mechanism of double exponential growth in hyper-inflation

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  • Takayuki Mizuno
  • Misako Takayasu
  • Hideki Takayasu

Abstract

Analyzing historical data of price indices we find an extraordinary growth phenomenon in several examples of hyper-inflation in which price changes are approximated nicely by double-exponential functions of time. In order to explain such behavior we introduce the general coarse-graining technique in physics, the Monte Carlo renormalization group method, to the price dynamics. Starting from a microscopic stochastic equation describing dealers' actions in open markets we obtain a macroscopic noiseless equation of price consistent with the observation. The effect of auto-catalytic shortening of characteristic time caused by mob psychology is shown to be responsible for the double-exponential behavior.

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  • Takayuki Mizuno & Misako Takayasu & Hideki Takayasu, 2001. "The mechanism of double exponential growth in hyper-inflation," Papers cond-mat/0112441, arXiv.org.
    • Handle: RePEc:arx:papers:cond-mat/0112441
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