Nonlinearity And Hyperinflation

The paper weakens the orthodox argument that firm control of the money supply is sufficient to control the rate of inflation in the medium to long run. It argues that local linearisation is not the appropriate strategy for dealing with macroeconomic models: the global dynamics should be analysed, using simulation methods if necessary. The paper provides an example of how striking analytical (including policy) results may depend as much on the method of analysing a model as on the economic assumptions upon which it is based.