Cointegration and Cagan's Model of Hyperinflation under Rational Expectations
AbstractWhen money and prices are integrated of order two, Philip Cagan's (1956) model of hyperinflation will give rise to two different levels of cointegration. In most of the literature on the German hyperinflation, one of these cointegrating relationships has been ruled out a priori by assuming that velocity shocks follow a random walk. Using data from the German hyperinflation, the author finds this assumption to be unjustified. Based on a straightforward extension of the cointegrated VAR-approach suggested by John Y. Campbell and Robert J. Shiller (1987), a method to evaluate the Cagan model under rational expectations and no bubbles is proposed and implemented to the German data. Copyright 1993 by Ohio State University Press.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 25 (1993)
Issue (Month): 3 (August)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Feliz, Raul Anibal & Welch, John H., 1997. "Cointegration and tests of a classical model of inflation in Argentina, Bolivia, Brazil, Mexico, and Peru," Journal of Development Economics, Elsevier, vol. 52(1), pages 189-219, February.
- Wilson Luiz Rotatori, 2006. "Dynamic Structural Models And The High Inflation Period In Brazil: Modelling The Monetary System," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting] 44, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
- Thomas M. Fullerton, Jr., 1999.
"Inflationary pressure determinants in México,"
El Colegio de México, Centro de Estudios Económicos, vol. 14(1), pages 33-51.
- Wilson Luiz Rotatori Correa, 2009. "Dynamic Structural Models and the High Ination Period in Brazil: Modelling the Monetary System," Economia, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 10(1), pages 69-100.
- Nielsen, Bent, 2008.
"On the Explosive Nature of Hyper-Inflation Data,"
Economics Discussion Papers
2008-9, Kiel Institute for the World Economy.
- Nielsen, Bent, 2008. "On the Explosive Nature of Hyper-Inflation Data," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 2(21), pages 1-29.
- Engsted, Tom, 2002. " Measures of Fit for Rational Expectations Models," Journal of Economic Surveys, Wiley Blackwell, vol. 16(3), pages 301-55, July.
- Bent Nielsen & Zorica Mladenovic, 2009.
"The role of income in money demand during hyper-inflation: the case of Yugoslavia,"
Economics Series Working Papers
2009-W02, University of Oxford, Department of Economics.
- Zorica Mladenovic & Bent Nielsen, 2009. "The role of income in money demand during hyper-inflation: the case of Yugoslavia," Economics Papers 2009-W02, Economics Group, Nuffield College, University of Oxford.
- Stefka Slavova, 2003. "Money demand during hyperinflation and stabilization: Bulgaria, 1991-2000," Applied Economics, Taylor & Francis Journals, vol. 35(11), pages 1303-1316.
- Engsted, Tom, 1996. "The monetary model of the exchange rate under hyperinflation: New encouraging evidence," Economics Letters, Elsevier, vol. 51(1), pages 37-44, April.
- Dimitris Georgoutsos & Georgios Kouretas, 2004.
"A Multivariate I(2) cointegration analysis of German hyperinflation,"
Applied Financial Economics,
Taylor & Francis Journals, vol. 14(1), pages 29-41.
- 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.
- Choudhry, T., 1998. "Another visit to the Cagan model of money demand: the latest Russian experience," Journal of International Money and Finance, Elsevier, vol. 17(2), pages 355-376, April.
- Engsted, Tom, 1998. "Money Demand During Hyperinflation: Cointegration, Rational Expectations, and the Importance of Money Demand Shocks," Journal of Macroeconomics, Elsevier, vol. 20(3), pages 533-552, July.
- Alexei Deviatov & Neil Wallace, 2006. "Estimating a Cagan-type demand function for gold: 1561-1913," Working Papers w0080, Center for Economic and Financial Research (CEFIR).
- Thomas M Fullerton Jr & Roberto Tinajero, 2004. "Short-Run Price Dynamics in Mexico," Macroeconomics 0407027, EconWPA.
- Chan, Hing Lin & Lee, Shu Kam & Woo, Kai-Yin, 2003. "An empirical investigation of price and exchange rate bubbles during the interwar European hyperinflations," International Review of Economics & Finance, Elsevier, vol. 12(3), pages 327-344.
- Fernando de Holanda Barbosa & Tito Nícias Teixeira da Silva Filho, 2008. "Testing Hyperinflation Theories Using the Inflation Tax Curve: A Case Study," Working Papers Series 166, Central Bank of Brazil, Research Department.
- Engsted, Tom & Haldrup, Niels, 1997. "Money demand, adjustment costs, and forward-looking behavior," Journal of Policy Modeling, Elsevier, vol. 19(2), pages 153-173, April.
- Atanas Christev, 2005. "The Hyperinflation Model of Money Demand (or Cagan Revisited): Some New Empirical Evidence from the 1990s," CERT Discussion Papers 0507, Centre for Economic Reform and Transformation, Heriot Watt University.
- Thomas M Fullerton Jr & Sylvanus I Ikhide, 2004. "An Econometric Analysis of the Nigerian Consumer Price Index," Development and Comp Systems 0407010, EconWPA.
- 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.
- Thomas M Fullerton Jr & Eiichi Araki, 2004. "A Theoretical Model of Industrial Economy Inflationary Dynamics," Macroeconomics 0408007, EconWPA.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.