Finite-time singularity signature of hyperinflation

DOI10.1016/S0378-4371(03)00247-4MaRDI QIDQ1394679zbMATH OpenFDO

Authors D. Sornette, H. Takayasu, Wei-Xing Zhou

Publication date 23 June 2003

Published in Physica A (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/physics/0301007

zbMATH Keywords

nonlinear ordinary differential equationpositive growth-rate feedbackspower law singularity

Mathematics Subject Classification ID

Microeconomic theory (price theory and economic markets) (91B24)

Abstract: We present a novel analysis extending the recent work of Mizuno et al. [2002] on the hyperinflations of Germany (1920/1/1-1923/11/1), Hungary (1945/4/30-1946/7/15), Brazil (1969-1994), Israel (1969-1985), Nicaragua (1969-1991), Peru (1969-1990) and Bolivia (1969-1985). On the basis of a generalization of Cagan's model of inflation based on the mechanism of ``inflationary expectation or positive feedbacks between realized growth rate and people's expected growth rate, we find that hyperinflations can be characterized by a power law singularity culminating at a critical time $t_c$. Mizuno et al.'s double-exponential function can be seen as a discrete time-step approximation of our more general nonlinear ODE formulation of the price dynamics which exhibits a finite-time singular behavior. This extension of Cagan's model, which makes natural the appearance of a critical time $t_c$, has the advantage of providing a well-defined end of the clearly unsustainable hyperinflation regime. We find an excellent and reliable agreement between theory and data for Germany, Hungary, Peru and Bolivia. For Brazil, Israel and Nicaragua, the super-exponential growth seems to be already contaminated significantly by the existence of a cross-over to a stationary regime.

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Cites work

• Finite-time singularity in the dynamics of the world population, economic and financial indices
• scientific article; zbMATH DE number 1987559 (Why is no real title available?)
• Oscillatory finite-time singularities in finance, population and rupture
• The mechanism of double-exponential growth in hyper-inflation
• THEORY OF SELF-SIMILAR OSCILLATORY FINITE-TIME SINGULARITIES

Cited in

(5)

• The mechanism of double-exponential growth in hyper-inflation
• Extended nonlinear feedback model for describing episodes of high inflation
• People's collective behavior in a hyperinflation
• A simple mechanism for financial bubbles: time-varying momentum horizon
• Finite-time singularity in the dynamics of the world population, economic and financial indices

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