Working Paper 163

Rational Expectations, Hyperinflation, and the Demand for Money

Lawrence J. Christiano | Consultant

Revised November 1, 1981

This paper shows how to derive the family of models in which Cagan’s model of hyperinflation is a rational expectations model. The slope parameter in Cagan’s portfolio balance equation is identified in some of these models and in others it is not—a fact which clarifies results obtained in several recent papers.

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