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Rational expectations, hyperinflation, and the demand for money

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  • Lawrence J. Christiano

Abstract

This paper shows how to derive the family of models in which Cagan’s model of hyperinflation is a rational expectations model. The slope parameter in Cagan’s portfolio balance equation is identified in some of these models and in others it is not—a fact which clarifies results obtained in several recent papers.

Suggested Citation

  • Lawrence J. Christiano, 1981. "Rational expectations, hyperinflation, and the demand for money," Working Papers 163, Federal Reserve Bank of Minneapolis.
  • Handle: RePEc:fip:fedmwp:163
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    References listed on IDEAS

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    1. Jacobs, Rodney L, 1975. "A Difficulty with Monetarist Models of Hyperinflation," Economic Inquiry, Western Economic Association International, vol. 13(3), pages 337-360, September.
    2. Khan, Mohsin S., 1975. "The monetary dynamics of hyperinflation : A note," Journal of Monetary Economics, Elsevier, vol. 1(3), pages 355-362, July.
    3. Hansen, Lars Peter & Sargent, Thomas J, 1983. "Aggregation over Time and the Inverse Optimal Predictor Problem for Adaptive Expectations in Conginuous Time," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(1), pages 1-20, February.
    4. Sargent, Thomas, 1976. "Econometric exogeneity and alternative estimators of portfolio balance schedules for hyperinflations : A note," Journal of Monetary Economics, Elsevier, vol. 2(4), pages 511-521, November.
    5. Salemi, Michael K & Sargent, Thomas J, 1979. "The Demand for Money during Hyperinflation under Rational Expectations: II," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(3), pages 741-758, October.
    6. Sims, Christopher A, 1972. "Money, Income, and Causality," American Economic Review, American Economic Association, vol. 62(4), pages 540-552, September.
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