IDEAS home Printed from https://ideas.repec.org/a/bla/germec/v13y2012i2p142-160.html
   My bibliography  Save this article

The Monetary Analysis of Hyperinflation and the Appropriate Specification of the Demand for Money

Author

Listed:
  • Alexandre Sokic

Abstract

The paper emerges from the failure of the traditional models of hyperinflation with rational expectations or perfect foresight. Using the insights from two standard optimizing monetary settings the paper shows that the possibility of perfect foresight monetary hyperinflation paths depends robustly on the essentiality of money. We show that the popular semilogarithmic form of the demand for money is not appropriate to analyse monetary hyperinflation with perfect foresight. We propose a simple test of money essentiality for the appropriate specification of the demand for money equation in empirical studies of hyperinflation.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Alexandre Sokic, 2012. "The Monetary Analysis of Hyperinflation and the Appropriate Specification of the Demand for Money," German Economic Review, Verein für Socialpolitik, vol. 13(2), pages 142-160, May.
    • Handle: RePEc:bla:germec:v:13:y:2012:i:2:p:142-160
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kiguel, Miguel A, 1989. "Budget Deficits, Stability, and the Monetary Dynamics of Hyperinflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(2), pages 148-157, May.
    2. Petrovic, Pavle & Mladenovic, Zorica, 2000. "Money Demand and Exchange Rate Determination under Hyperinflation: Conceptual Issues and Evidence from Yugoslavia," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(4), pages 785-806, November.
    3. Sturzenegger, Federico A, 1994. "Hyperinflation with Currency Substitution: Introducing an Indexed Currency," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(3), pages 377-395, August.
    4. Albert Marcet & Juan P. Nicolini, 2003. "Recurrent Hyperinflations and Learning," American Economic Review, American Economic Association, vol. 93(5), pages 1476-1498, December.
    5. Kingston, Geoffrey H., 1982. "The semi-log portfolio balance schedule is tenuous," Journal of Monetary Economics, Elsevier, vol. 9(3), pages 389-399.
    6. Fernando de Holanda Barbosa, 2017. "Competitive Equilibrium Hyperinflation Under Rational Expectations," SpringerBriefs in Economics, in: Exploring the Mechanics of Chronic Inflation and Hyperinflation, chapter 0, pages 77-91, Springer.
    7. Stefka Slavova, 2003. "Money demand during hyperinflation and stabilization: Bulgaria, 1991-2000," Applied Economics, Taylor & Francis Journals, vol. 35(11), pages 1303-1316.
    8. Obstfeld, Maurice & Rogoff, Kenneth, 1983. "Speculative Hyperinflations in Maximizing Models: Can We Rule Them Out?," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 675-687, August.
    9. Carl E. Walsh, 2003. "Monetary Theory and Policy, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232316, December.
    10. Buiter, Willem H, 1987. "A Fiscal Theory of Hyperdeflations? Some Surprising Monetarist Arithmetic," Oxford Economic Papers, Oxford University Press, vol. 39(1), pages 111-118, March.
    11. Rory Pilossof, 2009. "‘Dollarisation’ in Zimbabwe and the Death of an Industry," Review of African Political Economy, Taylor & Francis Journals, vol. 36(120), pages 294-299, June.
    12. María-José Gutiérrez & Jesús Vázquez, 2004. "Explosive Hyperinflation, Inflation-Tax Curve, and Modeling the Use of Money," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 160(2), pages 311-326, June.
    13. Arce, Oscar J., 2009. "Speculative hyperinflations and currency substitution," Journal of Economic Dynamics and Control, Elsevier, vol. 33(10), pages 1808-1823, October.
    14. John Ashworth & Lynne Evans, 1998. "Functional form of the demand for real balances in Cagan's hyperinflation model," Applied Economics, Taylor & Francis Journals, vol. 30(12), pages 1617-1623.
    15. Alexandre Sokic, 2010. "Modelling the Transaction Role of Money and the Essentiality of Money in an Explosive Hyperinflation Context," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(3), pages 387-396, September.
    16. Fernando de Holanda Barbosa, 2017. "Inflation Tax and Money Essentiality," SpringerBriefs in Economics, in: Exploring the Mechanics of Chronic Inflation and Hyperinflation, chapter 0, pages 51-59, Springer.
    17. Michael Bruno & Stanley Fischer, 1990. "Seigniorage, Operating Rules, and the High Inflation Trap," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(2), pages 353-374.
    18. Dimitris Georgoutsos & George Kouretas, 2000. "A Multivariate I(2) Cointegration Analysis Of German Hyperinflation," Working Papers 0001, University of Crete, Department of Economics, revised 00 Jul 2001.
    19. Calvo, Guillermo A & Leiderman, Leonardo, 1992. "Optimal Inflation Tax under Precommitment: Theory and Evidence," American Economic Review, American Economic Association, vol. 82(1), pages 179-194, March.
    20. Evans, Jean Lynne & Yarrow, George Keith, 1981. "Some Implications of Alternative Expectations Hypotheses in the Monetary Analysis of Hyperinflations," Oxford Economic Papers, Oxford University Press, vol. 33(1), pages 61-80, March.
    21. Evans, J Lynne, 1995. "The Demand for Money: Hyperinflation or High Inflation Traps," The Manchester School of Economic & Social Studies, University of Manchester, vol. 63(0), pages 49-56, Suppl..
    22. Bruno, Michael, 1989. "Econometrics and the Design of Economic Reform," Econometrica, Econometric Society, vol. 57(2), pages 275-306, March.
    23. Steve H. Hanke and Alex K. F. Kwok, 2009. "On the Measurement of Zimbabwe’s Hyperinflation," Cato Journal, Cato Journal, Cato Institute, vol. 29(2), pages 353-364, Winter.
    24. Vazquez, Jesus, 1998. "How high can inflation get during hyperinflation? A transaction cost demand for money approach," European Journal of Political Economy, Elsevier, vol. 14(3), pages 433-451, August.
    25. Adam, Klaus & Evans, George W. & Honkapohja, Seppo, 2006. "Are hyperinflation paths learnable?," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2725-2748, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hartwell, Christopher A & Szybisz, Martin Andres, 2021. "Corralling Expectations: The Role of Institutions in (Hyper)Inflation," MPRA Paper 105612, University Library of Munich, Germany.
    2. Zhao, Liuyan, 2017. "The behavior of money demand in the Chinese hyperinflation," China Economic Review, Elsevier, vol. 42(C), pages 145-154.
    3. Sokic, Alexandre & FABRIS, Nikola, 2013. "Euroization and cyclical stabilization in Montenegro: an empirical analysis," MPRA Paper 46537, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alexandre Sokic, 2008. "Theoretical support for a new class of demand for real cash balances in explosive hyperinflations," Working Papers of BETA 2008-13, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    2. Alexandre Sokic, 2008. "Monetary Hyperinflations, Speculative Hyperinflations and Modeling the Use of Money," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(3), pages 51-70, August.
    3. Pekarski, Sergey, 2011. "Budget deficits and inflation feedback," Structural Change and Economic Dynamics, Elsevier, vol. 22(1), pages 1-11, February.
    4. Alexandre Sokic, 2008. "Modelling the transaction role of money and the essentiality of money in a hyperinflation context," Working Papers of BETA 2008-12, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    5. Gutiérrez Huerta, María José & Vázquez Pérez, Jesús, 2002. "Explosive Hyperinflation, Inflation Tax Laffer Curve and Modelling the use of Money," DFAEII Working Papers 1988-088X, University of the Basque Country - Department of Foundations of Economic Analysis II.
    6. Alexandre Sokic, 2007. "Monetary hyperinflations and money essentiality," Working Papers of BETA 2007-21, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    7. Vazquez, Jesus, 1998. "How high can inflation get during hyperinflation? A transaction cost demand for money approach," European Journal of Political Economy, Elsevier, vol. 14(3), pages 433-451, August.
    8. Zhao, Liuyan, 2017. "The behavior of money demand in the Chinese hyperinflation," China Economic Review, Elsevier, vol. 42(C), pages 145-154.
    9. Oscar J. Arce, 2006. "Speculative Hyperinflations: When Can We Rule Them Out?," Computing in Economics and Finance 2006 376, Society for Computational Economics.
    10. María-José Gutiérrez & Jesús Vázquez, 2004. "Explosive Hyperinflation, Inflation-Tax Curve, and Modeling the Use of Money," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 160(2), pages 311-326, June.
    11. Alexandre Sokic, 2010. "Modelling the Transaction Role of Money and the Essentiality of Money in an Explosive Hyperinflation Context," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(3), pages 387-396, September.
    12. Jun-Hyun Ko & Hiroshi Morita, 2015. "How does hyperinflation shock the economy?: Panel VAR Approach," Working Papers e090, Tokyo Center for Economic Research.
    13. Zink, Helmut, 1993. "Stability problems in hyperinflation models," Discussion Papers, Series I 268, University of Konstanz, Department of Economics.
    14. Arce, Oscar J., 2009. "Speculative hyperinflations and currency substitution," Journal of Economic Dynamics and Control, Elsevier, vol. 33(10), pages 1808-1823, October.
    15. repec:zbw:bofrdp:2007_032 is not listed on IDEAS
    16. Wojciech W. Charemza & Yuriy Kharin & Vladislav Maevskiy, 2014. "Bilinear Forecast Risk Assessment for Non-systematic Inflation: Theory and Evidence," Dynamic Modeling and Econometrics in Economics and Finance, in: Frauke Schleer-van Gellecom (ed.), Advances in Non-linear Economic Modeling, edition 127, pages 205-232, Springer.
    17. Fernando de Holanda Barbosa, 2017. "Competitive Equilibrium Hyperinflation Under Rational Expectations," SpringerBriefs in Economics, in: Exploring the Mechanics of Chronic Inflation and Hyperinflation, chapter 0, pages 77-91, Springer.
    18. Easterly, William R & Mauro, Paolo & Schmidt-Hebbel, Klaus, 1995. "Money Demand and Seigniorage-Maximizing Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(2), pages 583-603, May.
    19. Patrick Honohan, 1994. "The Fiscal Approach to Financial Intermediation Policy," Papers WP049, Economic and Social Research Institute (ESRI).
    20. George W. Evans & Seppo Honkapohja, 2009. "Expectations, Learning and Monetary Policy: An Overview of Recent Research," Central Banking, Analysis, and Economic Policies Book Series, in: Klaus Schmidt-Hebbel & Carl E. Walsh & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series (ed.),Monetary Policy under Uncertainty and Learning, edition 1, volume 13, chapter 2, pages 027-076, Central Bank of Chile.

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:germec:v:13:y:2012:i:2:p:142-160. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/vfsocea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.