Speculative Hyperinflations in Maximizing Models: Can We Rule Them Out? / Maurice Obstfeld, Kenneth Rogoff.

Format:

Book

Author/Creator:

Obstfeld, Maurice.

Contributor:

National Bureau of Economic Research.

Rogoff, Kenneth.

Series:

Working Paper Series (National Bureau of Economic Research) no. w0855.

NBER working paper series no. w0855

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Speculative Hyperinflations in Maximizing Models

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1982.

Summary:

Knife-edge stability is a common property of dynamic monetary models assuming perfect foresight or rational expectations. These models can be closed with the assumption that the economy's equilibrium lies on the unique convergent path (the saddlepath). While this empirically plausible assumption yields sensible results, aggregative models are not specified in sufficient detail to allow one to prove that the saddlepath is the unique equilibrium path. Brock (1974, 1975) and Brock and Scheinkman (1980) have advanced models in which individual preferences are more fully specified and in which, under certain conditions, the uniqueness and stability of equilibrium can be rigorously demonstrated. This paper shows that these uniqueness conditions are economically unreasonable. Therefore, the question these maximizing models address remains unresolved.

Notes:

Print version record

February 1982.