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The statistical skeleton of the demand for real money balances during the German hyperinflation episode January 1921-November 1923

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  • Ahmed Asseery

Abstract

The aim of this study is to re-examine the common belief that the existence of the demand for real money balances during the German hyperinflation episode 1921:01-1923:11 is conditioned on truncating the data on June/July 1923 or on the omission of the first 18 months. It is demonstrated in this study that a stable relation can be found for the period 1921:03-1923:11 through taking into account the nonlinear functional relationship amongst the variables of the cointegrating regression. Using a variant of Phillips-Loretan ECM it is shown that, while the equilibrium error is forecastable on the basis of lagged change of real wage and the variability of inflation alone, the adjustment of actual to desired real money balances is, indeed, instantaneous as predicted by Cagan.

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  • Ahmed Asseery, 1999. "The statistical skeleton of the demand for real money balances during the German hyperinflation episode January 1921-November 1923," Applied Economics Letters, Taylor & Francis Journals, vol. 6(2), pages 93-96.
    • Handle: RePEc:taf:apeclt:v:6:y:1999:i:2:p:93-96
    DOI: 10.1080/135048599353708
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    References listed on IDEAS

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    1. Peter C. B. Phillips & Mico Loretan, 1991. "Estimating Long-run Economic Equilibria," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(3), pages 407-436.
    2. Michael, P & Nobay, A R & Peel, D A, 1994. "The German Hyperinflation and the Demand for Money Revisited," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(1), pages 1-22, February.
    3. Hakkio, Craig S. & Rush, Mark, 1991. "Cointegration: how short is the long run?," Journal of International Money and Finance, Elsevier, vol. 10(4), pages 571-581, December.
    4. Sen, D L & Dickey, David A, 1987. "Symmetric Test for Second Differencing in Univariate Time Series," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(4), pages 463-473, October.
    5. Peter C. B. Phillips & Bruce E. Hansen, 1990. "Statistical Inference in Instrumental Variables Regression with I(1) Processes," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(1), pages 99-125.
    6. Phillips, Peter C B & Ouliaris, S, 1990. "Asymptotic Properties of Residual Based Tests for Cointegration," Econometrica, Econometric Society, vol. 58(1), pages 165-193, January.
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