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

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  • Bent Nielsen
  • Zorica Mladenovic

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 University of Oxford, Department of Economics in its series Economics Series Working Papers with number 2009-W02.

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Date of creation: 01 Mar 2009
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Handle: RePEc:oxf:wpaper:2009-w02

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Keywords: Cointegration; Hyper-inflation; Income; Money-demand;

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