Recurrent Hyperinflations and Learning

Universitat Pompeu Fabra Economics Working Paper No. 244

39 Pages Posted: 5 Jun 1998

See all articles by Albert Marcet

Albert Marcet

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences; Centre for Economic Policy Research (CEPR)

Juan Pablo Nicolini

Universitat Pompeu Fabra

Date Written: 1997

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.

JEL Classification: D83, E17, E31

Suggested Citation

Marcet, Albert and Nicolini, Juan Pablo, Recurrent Hyperinflations and Learning (1997). Universitat Pompeu Fabra Economics Working Paper No. 244, Available at SSRN: https://ssrn.com/abstract=95989 or http://dx.doi.org/10.2139/ssrn.95989

Albert Marcet (Contact Author)

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
+34 93 542 2740 (Phone)
+34 93 542 1746 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Juan Pablo Nicolini

Universitat Pompeu Fabra ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain