The monetary analysis of hyperinflation and the appropriate specification of the demand for money
AbstractThe paper emerges from the failure of the traditional models of hyperinflation with rational expectations or perfect foresight. Using the insights from two standard optimizing monetary settings the paper shows that the possibility of perfect foresight monetary hyperinflation paths depends robustly on the essentiality of money. We show that the popular semilogarithmic form of the demand for money is not appropriate to analyse monetary hyperinflation with perfect foresight. We propose a simple test of money essentiality for the appropriate specification of the demand for money equation in empirical studies of hyperinflation.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 21503.
Date of creation: 19 Mar 2010
Date of revision:
monetary hyperinflation; inflation tax; money essentiality;
Other versions of this item:
- Alexandre Sokic, 2012. "The Monetary Analysis of Hyperinflation and the Appropriate Specification of the Demand for Money," German Economic Review, Verein für Socialpolitik, vol. 13(2), pages 142-160, 05.
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-04 (All new papers)
- NEP-CBA-2010-04-04 (Central Banking)
- NEP-HPE-2010-04-04 (History & Philosophy of Economics)
- NEP-MAC-2010-04-04 (Macroeconomics)
- NEP-MON-2010-04-04 (Monetary Economics)
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