Bubble, weak and strong hyperinflation: Theory and empirical evidence

Fernando Barbosa and Tito Nícias da Silva Filho

Economia, 2015, vol. 16, issue 2, 145_156

Abstract: This paper presents a theoretical framework that allows a taxonomy of hyperinflation, namely: (i) bubble, (ii) weak and (iii) strong hyperinflation. The inflation tax revenue curve is used to characterize each type of hyperinflation and we use this curve to test them. The bubble and strong hyperinflation hypotheses are rejected using Brazilian data. The weak hyperinflation hypothesis is not rejected and the economy could have been on the ‘wrong’ side of the Laffer curve during hyperinflation. This outcome, contrary to conventional wisdom, is predicted by this hypothesis, which presents a solution to an old puzzle of the hyperinflation literature.

Keywords: Hyperinflation; Fiscal crisis; Intertemporal budget constraint; Inflation tax revenue (search for similar items in EconPapers)
JEL-codes: E31 E41 E42 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (2)

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