American Economic Review: Vol. 93 No. 5 (December 2003)


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Recurrent Hyperinflations and Learning

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Marcet, Albert, and Juan P. Nicolini. 2003. "Recurrent Hyperinflations and Learning." American Economic Review, 93(5): 1476-1498.

DOI: 10.1257/000282803322655400


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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Marcet, Albert
Nicolini, Juan P.

American Economic Review

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