Recurrent Hyperinflations and Learning

Albert Marcet and Juan Pablo Nicolini

American Economic Review, 2003, vol. 93, issue 5, 1476-1498

Abstract: We use a model of boundedly rational learning to account for the observations of recurrent hyperinflations in the 1980's. In a standard monetary model we replace the assumption of full rational expectations by a formal definition of quasi-rational learning. The model under learning matches some crucial stylized facts observed during the recurrent hyperinflations experienced by several countries in the 1980's remarkably well. We argue that, despite being a small departure from rational expectations, quasi-rational learning does not preclude falsifiability of the model, it does not violate reasonable rationality requirements, and it can be used for policy evaluation.

Date: 2003
Note: DOI: 10.1257/000282803322655400
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Related works:
Working Paper: Recurrent hyperinflations and learning (2001)
Working Paper: Recurrent Hyperinflations and Learning (1998)
Working Paper: Recurrent Hyperinflations and Learning (1997)
Working Paper: Recurrent Hyperinflations and Learning (1997)
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