The mechanism of double exponential growth in hyper-inflation

Takayuki Mizuno, Misako Takayasu and Hideki Takayasu

Papers from arXiv.org

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.

Date: 2001-12
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Published in Physica A 308 (2002) 411

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