IDEAS home Printed from
   My bibliography  Save this article

Cointegration and Cagan's Model of Hyperinflation under Rational Expectations


  • Engsted, Tom


When money and prices are integrated of order two, Philip Cagan's (1956) model of hyperinflation will give rise to two different levels of cointegration. In most of the literature on the German hyperinflation, one of these cointegrating relationships has been ruled out a priori by assuming that velocity shocks follow a random walk. Using data from the German hyperinflation, the author finds this assumption to be unjustified. Based on a straightforward extension of the cointegrated VAR-approach suggested by John Y. Campbell and Robert J. Shiller (1987), a method to evaluate the Cagan model under rational expectations and no bubbles is proposed and implemented to the German data. Copyright 1993 by Ohio State University Press.

Suggested Citation

  • Engsted, Tom, 1993. "Cointegration and Cagan's Model of Hyperinflation under Rational Expectations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(3), pages 350-360, August.
  • Handle: RePEc:mcb:jmoncb:v:25:y:1993:i:3:p:350-60

    Download full text from publisher

    File URL:
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See for details.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mcb:jmoncb:v:25:y:1993:i:3:p:350-60. 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 (Christopher F. Baum). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.