Global bifurcations, credit rationing and recurrent hyperinflations

This paper proposes an alternative explanation to recurrent hyperinflations other than bounded rationality by explicitly considering the global dynamics of an economy with credit market frictions. In this paper we show that hyperinflations are self-generated and are manifestations of the underlying...

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Bibliographic Details
Published in:Journal of economic dynamics & control 2007-02, Vol.31 (2), p.473-491
Main Authors: Haro, Alex, Gomis-Porqueras, Pedro
Format: Article
Language:English
Subjects:
Dynamical systems
Dynamics
Economic theory
Global dynamics
Global economy
Hyperinflation
Inflation
Non-linear models
Nonlinear dynamical systems
Studies
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Summary:This paper proposes an alternative explanation to recurrent hyperinflations other than bounded rationality by explicitly considering the global dynamics of an economy with credit market frictions. In this paper we show that hyperinflations are self-generated and are manifestations of the underlying global dynamic properties of an economy with perfect foresight rational agents that face credit rationing. Moreover, we find that economies that are more credit constrained are more likely to experience recurrent hyperinflations.
ISSN:0165-1889
1879-1743
DOI:10.1016/j.jedc.2005.10.007