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On the Explosive Nature of Hyper-Inflation Data

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  • Nielsen, Bent

Abstract

Empirical analyses of Cagan?s money demand schedule for hyper-inflation have largely ignored the explosive nature of hyper-inflationary data. It is argued that this contributes to an (i) inability to model the data to the end of the hyper-inflation, and to (ii) discrepancies between ?estimated? and ?actual? inflation tax. A simple solution to these issues is found by replacing the conventional measure of inflation by the cost of holding money.

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  • Nielsen, Bent, 2008. "On the Explosive Nature of Hyper-Inflation Data," Economics Discussion Papers 2008-9, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwedp:7210
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    References listed on IDEAS

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    7. Nielsen, Bent, 2005. "Strong Consistency Results For Least Squares Estimators In General Vector Autoregressions With Deterministic Terms," Econometric Theory, Cambridge University Press, vol. 21(3), pages 534-561, June.
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    11. Engsted, Tom, 1996. "The monetary model of the exchange rate under hyperinflation: New encouraging evidence," Economics Letters, Elsevier, vol. 51(1), pages 37-44, April.
    12. Rahbek, Anders & Christian Kongsted, Hans & Jorgensen, Clara, 1999. "Trend stationarity in the I(2) cointegration model," Journal of Econometrics, Elsevier, vol. 90(2), pages 265-289, June.
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    15. Nielsen, Bent, 2010. "Analysis Of Coexplosive Processes," Econometric Theory, Cambridge University Press, vol. 26(3), pages 882-915, June.
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    Cited by:

    1. Katarina Juselius, 2009. "Time to reject the privileging of economic theory over empirical evidence? A Reply to Lawson (2009)," Discussion Papers 09-16, University of Copenhagen. Department of Economics.
    2. Ahumada, Hildegart A. & Garegnani, Maria Lorena, 2012. "Forecasting a monetary aggregate under instability: Argentina after 2001," International Journal of Forecasting, Elsevier, vol. 28(2), pages 412-427.
    3. Zorica Mladenovic & Bent Nielsen, 2009. "The role of income in money demand during hyper-inflation: the case of Yugoslavia," Economics Papers 2009-W02, Economics Group, Nuffield College, University of Oxford.
    4. Laporte, Audrey & Dass, Adrian Rohit & Ferguson, Brian S., 2017. "Is the Rational Addiction model inherently impossible to estimate?," Journal of Health Economics, Elsevier, vol. 54(C), pages 161-175.
    5. Rolando Gonzales Martínez, 2013. "Modeling Hyperinflation Phenomenon: A Bayesian Approach," Documentos de Investigación - Research Papers 8, CEMLA.
    6. Szybisz, Martin Andres, 2018. "Banking net income and macroeconomics, from multicollinearity to Granger causality using US data," MPRA Paper 90473, University Library of Munich, Germany.
    7. Fakhri J. Hasanov & Moayad H. Al Rasasi & Salah S. Alsayaary & Ziyadh Alfawzan, 2022. "Money demand under a fixed exchange rate regime: the case of Saudi Arabia," Journal of Applied Economics, Taylor & Francis Journals, vol. 25(1), pages 385-411, December.
    8. Jusélius, Katarina, 2009. "Special Issue on Using Econometrics for Assessing Economic Models: An Introduction," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-20.

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    More about this item

    Keywords

    Cost of holding money; co-explosiveness; co-integration; explosive processes; hyper-inflation;
    All these keywords.

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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