Are Stationary Hyperinflation Paths Learnable?
31 Pages Posted: 13 May 2003
Date Written: April 2003
Abstract
Earlier studies of the seigniorage inflation model have found that the high-inflation steady state is not stable under adaptive learning. We reconsider this issue and analyze the full set of solutions for the linearized model. Our main focus is on stationary hyperinflationary paths near the high-inflation steady state. The hyperinflationary paths are stable under learning if agents can utilize contemporaneous data. However, in an economy populated by a mixture of agents, some of whom only have access to lagged data, stable inflationary paths emerge only if the proportion of agents with access to contemporaneous data is sufficiently high.
Keywords: Indeterminacy, Inflation, Stability of Equilibria, Seigniorage
JEL Classification: C62, D83, D84, E31
Suggested Citation: Suggested Citation
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