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Tuesday, July 14, 2020 | History

2 edition of rational expectations catastrophe model of hyperinflation found in the catalog.

rational expectations catastrophe model of hyperinflation

Victoria Barnett

rational expectations catastrophe model of hyperinflation

by Victoria Barnett

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  • 5 Currently reading

Published by typescript in [s.l.] .
Written in English


Edition Notes

Dissertation (M.Sc.) - University of Warwick, 1995.

Statementby Victoria Barnett.
ID Numbers
Open LibraryOL19084684M

Other articles where Theory of rational expectations is discussed: business cycle: Rational expectations theories: In the early s the American economist Robert Lucas developed what came to be known as the “Lucas critique” of both monetarist and Keynesian theories of the business cycle. Building on rational expectations concepts introduced by the American economist John Muth, Lucas. Economists have developed models in which individuals form expectations of key variables in a "rational" manner such that these expectations are consistent with actual economic environments. In this revised and expanded second edition, Professor Sheffrin first explores the logical foundation of the concept and the case for employing it in economic analysis.

If I really wanted to focus in detail on how expectations were formed and adjusted, I would look to the large mainstream literature on learning, to which Professor Syll does not refer. (Key figures in developing this literature included Tom Sargent, Albert Marcet, George Evans and Seppo Honkapohja: here is a nice interview involving three of them.).) Macroeconomic ideas derived from rational Author: Mainly Macro.   The rational-expectations revolution that Lucas pioneered still dominates economic policymaking. The unwillingness of either the Bush or the Clinton Administrations to take strong measures against the recession and its aftermath reflected the influence of Lucas and his colleagues.

study support the Cagan model of money demand in the East European hyperinflation experiences of the s. However, our results do not indicate that the rational expectations hypothesis holds during these episodes. In addition, we also test the hypothesis that monetary. The theory of rational expectations The role that expectations play in the inflationist process it is at the bottom of the differences who exist between the traditional theories of explaining the inflation and the theories who appeared in the last fifty years. The concept of “expectations” in the economic thought has been formulated, as it.


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Rational expectations catastrophe model of hyperinflation by Victoria Barnett Download PDF EPUB FB2

This paper teaches Dynare by applying it to approximate equilibria and estimate nine dynamic economic models. Among the models estimated are a rational expectations model of hyperinflation by Sargent, Hansen, Sargent, and Tallarini’s risk-sensitive permanent income model, and one and two-country stochastic growth models.

In economics, "rational expectations" are model-consistent expectations, in that agents inside the model are assumed to "know the model" and on average take the model's predictions as valid. Rational expectations ensure internal consistency in models involving uncertainty.

To obtain consistency within a model, the predictions of future values of economically relevant variables from the model. RATIONAL EXPECTATIONS AND THE DYNAMICS OF HYPERINFLATION* BY THOMAS J. SARGENT AND NEIL WALLACE1 INTRODUCTION THIS IS A STUDY of some theoretical difficulties and estimation problems that arise in economic models in which current expectations of future values of some of the endogenous variables enter in an essential way.2 Such models are common.

Rational Expectations Theory: The rational expectations theory is an economic idea that the people make choices based on their rational outlook, available information and past experiences.

The. Rational expectations are the best guess for the future. Rational expectations suggest that although people may be wrong some of the time, on average they will be correct. In particular, rational expectations assumes that people learn from past mistakes. Rational expectations have implications for economic policy.

RATIONAL EXPECTATIONS vs. ADAPTIVE BEHAVIOR IN A HYPERINFLATIONARY WORLD: EXPERIMENTAL Rational expectations catastrophe model of hyperinflation book Ramon Marimon Shyani Sunder U ni versity of Minnesota June, * A preliminary report of this work was presented at the Conference on Learning from Endogenous Data, Center for Analytic Economics.

In the recent literature Sargent and Wallace (IER, June, ) have estimated the demand equation for money in hyperinflation under the restriction that the adaptive formula of Phillip Cagan yields rational inflation expectations in the sense of John present paper finds evidence to reject for the Germany case the proposition that adaptive expectations are by: 8.

CAGAN'S MODEL OF HYPERINFLATION UNDER RATIONAL EXPECTATIONS* BY LAWRENCE J. CHRISTIANO' 1. INTRODUCTION In Cagan published what has become a classic paper on the demand for money during hyperinflation. In that paper, the demand for real cash balances is a function of the public's expectation of the future course of inflation.

Cagan. As a consequence of this, all tests of rational expectations restrictions, like those described in Section 5, can be interpreted in the Durlauf-Hall framework. Money Demand During Hyperinflation For example, tests based on the VAR model (8) are in principle similar to the Durlauf-Hall approach with Ht identical to q)t Campbell and Cited by: theory of rational expectations (TRE): Economic-behavior observation according to which: (1) On average, people can quite correctly predict future conditions and take actions accordingly, even if they do not fully understand the cause-and-effect (causal) relationships underlying the events and their own thinking.

Thus, while they do not have. proaches are all illustrated in the context of a common model, a log-linearized New Keynesian model in which both households and firms solve infinite-horizon decision problems; under the hypothesis of rational expectations, the model re-duces to the standard “3-equation model” used in studies such as Clarida et al.

The alternative. 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 Cited by: ADVERTISEMENTS: Read this article to learn about the seven major implications and challenges of rational expectations.

(i) Validity of Impotency Result: The most important implication of the rational expectations model on economics during the last decade or so has been that aggregate demand management designed to lower unemployment will always be ineffective. Abstract. Cagan’s () seminal work provided the first attempt to explain the hyperinflation phenomenon.

That essay was so influential that small variations of Cagan’s model can be found in several textbooks, such as Blanchard and Fischer (), Obstfeld and Rogoff () and Romer ().Cagan’s model is capable of generating hyperinflation under two types of expectation Cited by: Rational Expectations and the Effects of Monetary Policy: A Guide for the Uninitiated A.

Steven Holland ~&. HE success or failure of any course of action often depends on the ability to anticipate events that have not yet occurred, or that have occurred but at’eFile Size: KB. This collection of essays uses the lens of rational expectations theory to examine how governments anticipate and plan for inflation, and provides insight into the pioneering research for which Thomas Sargent was awarded the Nobel Prize in economics.

Rational expectations theory is based on the simple premise that people will use all the information available to them in making economic. 3) Expectations are hard to test even though economists know the model the public uses when forming expectations.

false 4) Any test of rational expectations is a joint test of the underlying model that expectations are formed rationally. Focus of the rational expectations approach is that it is a possibility that forecasts by economic agents may not always be accurate but while forming expectations agents do not make systematic errors.

Also rational expectations model deals with the equilibrium state in which markets immediately clear. This is “Rational Expectations Redux: Monetary Policy Implications”, chapter 26 from the book Finance, That new model uses the AS, which is not atypical of countries that end hyperinflation, supports the two rational expectation-based models over the pre-Lucas AS-AD model, which predicts 4 percent losses in GDP for every 1 percent.

This is a book about the German hyperinflation of Well it is actually about the German inflation of Lots of people who read about European history know of the German inflation, which was a catastrophe for the German people and which is still recalled today in debates on EU monetary policy/5. Rational expectations vs.

adaptive behavior in a hyperinflationary world: Experimental evidence (Discussion paper series) [Ramon Marimon] on *FREE* shipping on qualifying offers.rational expectations models consistent with ob- served business cycles. The organization of our discussion is as follows.

First, we briefly consider a set of “stylized facts” that any successful model must minimally produce. Then, we turn to four categories of rational expectations.InPhillip Cagan wrote The Monetary Dynamics of Hyperinflation, the book often regarded as the first serious study of hyperinflation and its effects (though The Economics of Inflation by C.

Bresciani-Turroni on the German hyperinflation was published in Italian in ).In his book, Cagan defined a hyperinflationary episode as starting in the month that the monthly inflation rate exceeds.