Some Implications of Alternative Expections Hypotheses in the Monetary Analysis of Hyperinflations

Macroeconomic Effects of a Tax on Bond Interest Rates

“…7See Evans and Yarrow (1981) for an analysis of some other assumptions about expectations in the context of a monetary model. In the first period of life, Yt is allocated between consumption, ctl, and saving, which is, in turn, allocated between real balances mt = MtlPt and indexed bonds bt that bear real interest of rt (note that rt 7& rt because of FR).…”

Global bifurcations, credit rationing and recurrent hyperinflations

“…Let F : X ⊂ R n → R n be the map describing the dynamical system, and suppose that the origin is a steady state(s). 11 The topological behavior near the steady state(s) is fully explained by the matrix A=DF (0), provided that this matrix does not contain eigenvalues in the unit circle (of modulus 1) as asserted by the HartmanGrobman theorem. In many instances, one can get differential or analytic equivalence using the normal forms theorems of Poincare, Dulac and Siegel (see [1] or [14] for a detailed description of the theorems).…”

“…Our goal is to obtain a 1-dimensional invariant nonlinear manifold W parameterized by the function W =W (τ ), where W :I ⊂ R→R n , so that the motion of the parameter is just a multiplication by the corresponding eigenvalue λ. 12 Since any point in the invariant manifold will always be on the manifold under the action of the map, the resulting 11 We can always achieve this situation by just translating the coordinates to the steady state(s).…”

“…In the same spirit, 1 Households adjust their real balances according to expected inflation. 2 In the same spirit, Evans and Yarrow (1981) [11] and Bruno and Fisher (1990) [6] interpret hyperinflations as a situation in which the economy converges towards a high inflation steady state along the inflation tax Laffer curve.…”

Explosive Hyperinflation, Inflation-Tax Laffer Curve, and Modeling the Use of Money

“…The rationale for an inflationary finance policy is that generating inflation through a persistent rise in the money supply can be understood as a means of raising revenues for the government by using an inflation tax. 1 Most of the inflationary finance models developed in the literature (for instance, Evans and Yarrow, 1981;Kiguel, 1989;Bruno, 1989;Bruno and Fischer 1990) are built on Cagan's demand for money (Cagan, 1956). Under perfect foresight those models imply the possibility of dual equilibria and the existence of a (concave) inflation tax Laffer curve (ITLC), which means that inflation does not explode.…”