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Modeling Hyperinflation Phenomenon: A Bayesian Approach

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  • Rolando Gonzales Martínez
  • Last: Gonzales Martínez

    ()
    (Unidad de Análisis de Políticas Económicas y Sociales, Bolivian Government)

Abstract

Hyperinflations are short-lived episodes of economic instability in prices which characteristically last twenty months or less. Classical statistical techniques applied to these small samples could lead to an incorrect inference problem. This paper describes a Bayesian approach for modeling hyper-inflations which improves the modeling accuracy using small-sample inference based on specific parametric assumptions. A theory-congruent model for the Bolivian hyperinflation was estimated as a case study.

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Bibliographic Info

Paper provided by Centro de Estudios Monetarios Latinoamericanos, CEMLA in its series Documentos de Investigación - Research Papers with number 8.

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Length: 28
Date of creation: Apr 2013
Date of revision:
Handle: RePEc:cml:docinv:8

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Keywords: Hyperinflation; Bayesian methods;

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  1. Sachs, Jeffrey, 1987. "The Bolivian Hyperinflation and Stabilization," American Economic Review, American Economic Association, vol. 77(2), pages 279-83, May.
  2. Gray, Jo Anna, 1984. "Dynamic Instability in Rational Expectations Models: An Attempt to Clarify," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 93-122, February.
  3. John C. Robertson & Ellis W. Tallman, 1999. "Vector autoregressions: forecasting and reality," Economic Review, Federal Reserve Bank of Atlanta, issue Q1, pages 4-18.
  4. Sims, Christopher A., 1988. "Bayesian skepticism on unit root econometrics," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 463-474.
  5. 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.
  6. Greenberg,Edward, 2008. "Introduction to Bayesian Econometrics," Cambridge Books, Cambridge University Press, number 9780521858717, April.
  7. Taylor, Mark P, 1990. "The Hyperinflation Model of Money Demand Revisited," CEPR Discussion Papers 473, C.E.P.R. Discussion Papers.
  8. Thomas J. Sargent, 1976. "The demand for money during hyperinflations under rational expectations: II," Working Papers 60, Federal Reserve Bank of Minneapolis.
  9. Litterman, Robert B, 1986. "Forecasting with Bayesian Vector Autoregressions-Five Years of Experience," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(1), pages 25-38, January.
  10. 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.
  11. Phylaktis, Kate & Taylor, Mark P, 1993. "Money Demand, the Cagan Model and the Inflation Tax: Some Latin American Evidence," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 32-37, February.
  12. Sims, Christopher A & Zha, Tao, 1998. "Bayesian Methods for Dynamic Multivariate Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 949-68, November.
  13. Sargent, Thomas J & Wallace, Neil, 1973. "Rational Expectations and the Dynamics of Hyperinflation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(2), pages 328-50, June.
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