Recurrent Hyperinflations and Learning
Universitat Pompeu Fabra Economics Working Paper No. 244
39 Pages Posted: 5 Jun 1998
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: Suggested Citation
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