Revisiting speculative hyperinflations in monetary models: A rejoinder

Behzad Diba; Olivier Loisel

doi:10.1016/j.red.2023.11.005

Revisiting speculative hyperinflations in monetary models: A rejoinder

Behzad Diba
, Olivier Loisel

Georgetown University

Research output: Contribution to journal › Article › peer-review

Abstract

In this note, we present a formal proof of Obstfeld and Rogoff's (1983, 2021) claim that their fractional-currency-backing scheme eliminates the inflationary equilibria in the money-in-utility model. To do so, we fully articulate the optimization problem of consumers who have the option to redeem (part or all of) their cash for a small amount of goods at any date. We also relate the scheme to the Fiscal Theory of the Price Level.

Original language	English
Pages (from-to)	64-69
Number of pages	6
Journal	Review of Economic Dynamics
Volume	52
DOIs	https://doi.org/10.1016/j.red.2023.11.005
Publication status	Published - 1 Apr 2024

Keywords

Fractional currency backing
Money-in-utility model
Speculative hyperinflation

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10.1016/j.red.2023.11.005

Cite this

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title = "Revisiting speculative hyperinflations in monetary models: A rejoinder",

abstract = "In this note, we present a formal proof of Obstfeld and Rogoff's (1983, 2021) claim that their fractional-currency-backing scheme eliminates the inflationary equilibria in the money-in-utility model. To do so, we fully articulate the optimization problem of consumers who have the option to redeem (part or all of) their cash for a small amount of goods at any date. We also relate the scheme to the Fiscal Theory of the Price Level.",

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N2 - In this note, we present a formal proof of Obstfeld and Rogoff's (1983, 2021) claim that their fractional-currency-backing scheme eliminates the inflationary equilibria in the money-in-utility model. To do so, we fully articulate the optimization problem of consumers who have the option to redeem (part or all of) their cash for a small amount of goods at any date. We also relate the scheme to the Fiscal Theory of the Price Level.

AB - In this note, we present a formal proof of Obstfeld and Rogoff's (1983, 2021) claim that their fractional-currency-backing scheme eliminates the inflationary equilibria in the money-in-utility model. To do so, we fully articulate the optimization problem of consumers who have the option to redeem (part or all of) their cash for a small amount of goods at any date. We also relate the scheme to the Fiscal Theory of the Price Level.

KW - Fractional currency backing

KW - Money-in-utility model

KW - Speculative hyperinflation

U2 - 10.1016/j.red.2023.11.005

DO - 10.1016/j.red.2023.11.005

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JO - Review of Economic Dynamics

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Revisiting speculative hyperinflations in monetary models: A rejoinder

Abstract

Keywords

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