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American Economic Review: Vol. 93 No. 5 (December 2003)
AER Volume. 93, Issue 5 | 
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Recurrent Hyperinflations and Learning
Article Citation
Marcet, Albert, and
Juan P. Nicolini. 2003. "Recurrent Hyperinflations and Learning."
The American Economic Review,
93(5): 1476-1498.
DOI: 10.1257/000282803322655400
DOI: 10.1257/000282803322655400
Abstract
We use a model of boundedly rational learning to account for the observations of recurrent hyperinflations in the 1980's. In a standard monetary model we replace the assumption of full rational expectations by a formal definition of quasi-rational learning. The model under learning matches some crucial stylized facts observed during the recurrent hyperinflations experienced by several countries in the 1980's remarkably well. We argue that, despite being a small departure from rational expectations, quasi-rational learning does not preclude falsifiability of the model, it does not violate reasonable rationality requirements, and it can be used for policy evaluation.
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Authors
Marcet, Albert
Nicolini, Juan P.
Nicolini, Juan P.
