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The role of income in money demand during hyper-inflation: the case of Yugoslavia

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  • Zorica Mladenovic

    ()
    (Faculty of Economics, University of Belgrade)

  • Bent Nielsen

    ()
    (Department of Economics, University of Oxford)

Abstract

During extreme hyper-inflations productivity tends to fall dramatically. Yet, in models of money demand in hyper-inflation variables such as real income has been given a somewhat passive role, either assuming it exogenous or to have a negligible role. In this paper we use an empirical methodology based on cointegrated vector autoregressions to analyse data from the extreme Yugoslavian episode to investigate the role of income. The analysis suggests that even in extreme hyper-inflation the monetary variables and real income are simultaneously determined. The methodology enables a description of the short term adjustment of the variables considered.

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Bibliographic Info

Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2009-W02.

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Length: 23 pages
Date of creation: 27 Mar 2009
Date of revision:
Handle: RePEc:nuf:econwp:0902

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Web page: http://www.nuff.ox.ac.uk/economics/

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Keywords: Cointegration; hyper-inflation; income; money-demand;

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