Cagan's Model of Hyperinflation under Rational Expectations
This paper studies P. Cagan's model of the German hyperinflation under the hypothesis that adaptive expectations are rational. It shows that inference about the key money demand elasticity parameter, a, is very senstitive to the specification of the dynamic interaction of the unobserved money demand shock with prices and money. In particular, if T. J. Sargent's 1977 specification is modified, then his basic conclusions are overturned: identification of a does not require prior knowledge about the covariance of unobserved shock terms; and d ata on the German hyperinflation imply a sharp, not loose estimate of a, which is of plausible magnitude. Finally, informal tests indicate that modifying Sargent's specification gives rise to improved model fit. Copyright 1987 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 28 (1987)
Issue (Month): 1 (February)
|Contact details of provider:|| Postal: 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297|
Phone: (215) 898-8487
Fax: (215) 573-2057
Web page: http://www.econ.upenn.edu/ier
More information through EDIRC
|Order Information:|| Web: http://www.blackwellpublishing.com/subs.asp?ref=0020-6598 Email: |
When requesting a correction, please mention this item's handle: RePEc:ier:iecrev:v:28:y:1987:i:1:p:33-49. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or ()
If references are entirely missing, you can add them using this form.