Misspecification versus bubbles in hyperinflation data: Comment
AbstractIn this comment I critically review some of the claims and analyses made by Hooker (2000) in his study of the Cagan hyperinflation model. I argue that: i) contrary to what Hooker claims, cointegration tests can be used to discriminate between bubbles and no bubbles; ii) contrary to Hooker's claim, his empirical results for the interwar European hyperinflations do not general imply that the Cagan model is misspecified; iii) although Hooker's analyses build directly on the Durlauf and Hall (1989) methodology, he neglects an important part of that methodology, namely the measurement of the magnitude of noise. I present such measures, and together with reported cointegration tests the noise measure help reinterpreting Hooker's empirical results.
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Bibliographic InfoPaper provided by University of Aarhus, Aarhus School of Business, Department of Business Studies in its series Finance Working Papers with number 02-2.
Length: 14 pages
Date of creation: 21 Feb 2002
Date of revision:
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Cagan model; Cointegration; Measurement of noise;
Other versions of this item:
- Engsted, Tom, 2003. "Misspecification versus bubbles in hyperinflation data: comment," Journal of International Money and Finance, Elsevier, vol. 22(4), pages 441-451, August.
- NEP-ALL-2002-06-13 (All new papers)
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