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Money and inflation in a nonlinear model

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  • George, Donald A.R.
  • Oxley, Les

Abstract

A nonlinear model of inflation and growth, with a fixed rate of money growth, is developed and its global dynamics analysed. These are compared with the local, linearised dynamics of the model. It is shown that the global dynamics of the model plausibly predict hyperinflationary bubbles, which are not present in the linearised version. Numerical simulations of the model are presented.

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  • George, Donald A.R. & Oxley, Les, 2008. "Money and inflation in a nonlinear model," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 78(2), pages 257-265.
    • Handle: RePEc:eee:matcom:v:78:y:2008:i:2:p:257-265
    DOI: 10.1016/j.matcom.2008.01.032
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    1. Fischer, Stanley, 1979. "Capital Accumulation on the Transition Path in a Monetary Optimizing Model," Econometrica, Econometric Society, vol. 47(6), pages 1433-1439, November.
    2. Flood, Robert P & Garber, Peter M, 1980. "An Economic Theory of Monetary Reform," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 24-58, February.
    3. Salemi, Michael K & Sargent, Thomas J, 1979. "The Demand for Money during Hyperinflation under Rational Expectations: II," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(3), pages 741-758, October.
    4. George, Donald A. R. & Oxley, Leslie T., 1985. "Structural stability and model design," Economic Modelling, Elsevier, vol. 2(4), pages 307-316, October.
    5. Sargent, Thomas J & Wallace, Neil, 1973. "Rational Expectations and the Dynamics of Hyperinflation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(2), pages 328-350, June.
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    Cited by:

    1. Herbert, Ric D. & Stemp, Peter J., 2011. "Solving macroeconomic models with “off-the-shelf” software: An example of potential pitfalls," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 81(7), pages 1375-1384.
    2. Ringwald, Leopold & Zörner, Thomas O., 2023. "The money-inflation nexus revisited," Journal of Empirical Finance, Elsevier, vol. 73(C), pages 293-333.

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    Keywords

    Money; Inflation; Nonlinearity;
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