Hyperinflation in Brazil, Israel, and Nicaragua revisited

• Episodes of hyperinflation occurred in Brazil, Israel and Nicaragua are reanalyzed.
• The nonlinear feedback (NLF) model for hyperinflation was applied.
• Reasonable critical times tctc were predicted for Brazil and Nicaragua.
• Hyperinflation in Israel was too week for determining a tctc within the NLF model.

The aim of the present work is to address the description of hyperinflation regimens in economy. The spirals of hyperinflation developed in Brazil, Israel, and Nicaragua are revisited. This new analysis of data indicates that the episodes occurred in Brazil and Nicaragua can be understood within the frame of the model available in the literature, which is based on a nonlinear feedback (NLF) characterized by an exponent β>0β>0. In the NLF model the accumulated consumer price index carries a finite time singularity of the type 1/(tc−t)(1−β)/β1/(tc−t)(1−β)/β determining a critical time tctc at which the economy would crash. It is shown that in the case of Brazil the entire episode cannot be described with a unique set of parameters because the time series was strongly affected by a change of policy. This fact gives support to the “so called” Lucas critique, who stated that model’s parameters usually change once policy changes. On the other hand, such a model is not able to provide any tctc in the case of the weaker hyperinflation occurred in Israel. It is shown that in this case the fit of data yields β→0β→0. This limit leads to the linear feedback formulation which does not predict any tctc. An extension for the NLF model is suggested.