Competitive equilibrium hyperinflation under rational expectations |
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Authors: | Fernando H Barbosa Alexandre B Cunha Elvia Mureb Sallum |
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Institution: | 1. Graduate School of Economics, Getulio Vargas Foundation, Praia de Botafogo 190, 11 andar, Rio de Janeiro, RJ, 22250-900, Brazil 2. IBMEC Business School, Avenida Rio Branco 108, sala 914, Rio de Janeiro, RJ, 20040-001, Brazil 3. Institute of Mathematics and Statistics, University of S?o Paulo, Cidade Universitária, Rua do Mat?o 1010, S?o Paulo, SP, 05508-090, Brazil
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Abstract: | This paper shows that a competitive equilibrium model, where a representative agent maximizes welfare, expectations are rational and markets are in equilibrium can account for several hyperinflation stylized facts. The theory is built by combining two hypotheses, namely, a fiscal crisis that requires printing money to finance an increasing public deficit and a predicted change in an unsustainable fiscal regime.We thank an anonymous referee for very helpful comments. A. B. Cunha acknowledges financial support from the Brazilian Council of Science and Technology (CNPq). |
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Keywords: | Hyperinflation Rational expectations Competitive equilibrium Fiscal crisis |
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