Are Stationary Hyperinflation Paths Learnable?

Adam, Klaus; Evans, George W.; Honkapohja, Seppo

doi:10.2139/ssrn.406961

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Are Stationary Hyperinflation Paths Learnable?

31 Pages Posted: 13 May 2003

See all articles by Klaus Adam

Klaus Adam

University of Mannheim; European Central Bank (ECB) - Department of Research; Centre for Economic Policy Research (CEPR)

George W. Evans

University of Oregon - Department of Economics; University of St. Andrews - School of Economics and Finance

Seppo Honkapohja

Centre for Economic Policy Research (CEPR); Aalto University School of Business; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Aalto University - School of Business

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

Adam, Klaus and Evans, George W. and Honkapohja, Seppo and Honkapohja, Seppo, Are Stationary Hyperinflation Paths Learnable? (April 2003). Available at SSRN: https://ssrn.com/abstract=406961 or http://dx.doi.org/10.2139/ssrn.406961