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The monetary model of hyperinflation and the adaptive expectations: limits of the association and model validity

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  • Alexandre Sokic

Abstract

This article highlights the strict association met in the literature between the adaptive expectations assumption and the correct running of the monetary model of hyperinflation. A complete resolution of the model is carried out under the adaptive expectations hypothesis. It is shown that the assumption of adaptive expectations is not sufficient to ensure the validity of the model for the explanation of monetary hyperinflation. This result raises the question of the field of validity of this model already posed by the introduction of rational expectations. The possibility of development of self-generating hyperinflationary bubbles strengthens the relevance of this question.

Suggested Citation

  • Alexandre Sokic, 2007. "The monetary model of hyperinflation and the adaptive expectations: limits of the association and model validity," Working Papers of BETA 2007-09, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  • Handle: RePEc:ulp:sbbeta:2007-09
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    File URL: http://www.beta-umr7522.fr/productions/publications/2007/2007-09.pdf
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    Keywords

    hyperinflation; seigniorage; hyperinflationary bubbles.;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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