The mechanism of double-exponential growth in hyper-inflation

T. Mizuno, M. Takayasu and H. Takayasu

Physica A: Statistical Mechanics and its Applications, 2002, vol. 308, issue 1, 411-419

Abstract: Analyzing historical data of price indices, we find an extraordinary growth phenomenon in several examples of hyper-inflation in which, price changes are approximated nicely by double-exponential functions of time. In order to explain such behavior we introduce the general coarse-graining technique in physics, the Monte Carlo renormalization group method, to the price dynamics. Starting from a microscopic stochastic equation describing dealers’ actions in open markets, we obtain a macroscopic noiseless equation of price consistent with the observation. The effect of auto-catalytic shortening of characteristic time caused by mob psychology is shown to be responsible for the double-exponential behavior.

Keywords: Econophysics; Inflation; Market price (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:308:y:2002:i:1:p:411-419

DOI: 10.1016/S0378-4371(02)00598-8

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