Thanks to a very perceptive question about how to get out of hyperinflations today, I've put together these links to help students interested in this area. The original Cagan model is very hard to find, so we'll have to do at short notice with lecture notes and extensions to the original.
1. Cagan's Model of Hyperinflation under Rational Expectations, Lawrence J. Christiano, International Economic Review, Vol. 28, No. 1 (Feb., 1987), pp. 33-49
2. Prof. Juha Seppälä's lecture notes on the Cagan Model.
3. BBC News article on living with a hyperinflation.
Brilliant quote from the article:
It's a very strange environment. There are a lot of pay rises, but they are meaningless. They are always eroded the minute they give us the pay rise. Also, considering we have so much to pay - we have parents in the countryside, and we have families - it doesn't work. People are willing to lend money, but they are not willing to lend it for nothing. It's usually at a rate of 90 or 100%. Sometimes these are your relatives or people you work with, taking advantage of this. People are cannibalising each other.
4. Zimbabwe's Central Bank on their inflation Rate
Hi Stephen
All of the models we have available for hyperinflation deal with getting out of the hyperinflationary cycle, and are therefore macro-economic models for governemtn etc to use. I am working on a model at present to determine at what point we should cease trading as staying in limbo is more viable than making a "profit". Our key constraint is the set of limitations on converting currency, but in addition the trading model has legal restraints that work against replacement pricing strategies to protect shareholder value. We have become quite adept at keeping our businesses alive, using borrowings at negative real interest rates etc but with inflation now running at over 500% per month and accelerating, we are having alternative thoughts, especially that with an imminent change of political scenario we might find ourselves facing a situation when our large borrowings are suddenly attached to a real interest rate - good for inflation but bad for us - and we want to be ready to counter this threat. Can you perhaps help us with any pointers?
Your assistance is appreciated.