Global Bifurcations, Credit Rationing and Recurrent Hyperinflations

• Authors: Àlex Haro and Pere Gomis-Porqueras.
• BSE Working Paper: 239 | September 15
• Keywords: Nonlinear Dynamical Systems , Global Dynamics
• JEL codes: E44, E32
• Nonlinear Dynamical Systems
• Global Dynamics

This paper proposes an alternative explanation to recurrent hyperinflations other than bounded rationality by explicitly considering the global dynamics of an economy with credit market frictions. In this paper we show that hyperinflations are self-generated and are manifestations of the underlying global dynamic properties of an economy with perfect foresight rational agents that face credit rationing. Moreover, we found that economies that are more credit constrained are more likely to experience recurrent hyperinflations.