Misspecification versus bubbles in hyperinflation data: Comment
In this comment I critically review some of the claims and analyses made by Hooker (2000) in his study of the Cagan hyperinflation model. I argue that: i) contrary to what Hooker claims, cointegration tests can be used to discriminate between bubbles and no bubbles; ii) contrary to Hooker's claim, his empirical results for the interwar European hyperinflations do not general imply that the Cagan model is misspecified; iii) although Hooker's analyses build directly on the Durlauf and Hall (1989) methodology, he neglects an important part of that methodology, namely the measurement of the magnitude of noise. I present such measures, and together with reported cointegration tests the noise measure help reinterpreting Hooker's empirical results.
|Date of creation:||21 Feb 2002|
|Date of revision:|
|Contact details of provider:|| Postal: |
Fax: + 45 86 15 19 43
Web page: http://www.asb.dk/about/departments/bs.aspx
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Diba, Behzad T & Grossman, Herschel I, 1988. "Explosive Rational Bubbles in Stock Prices?," American Economic Review, American Economic Association, vol. 78(3), pages 520-30, June.
- 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.
- Campbell, John & Shiller, Robert, 1987.
"Cointegration and Tests of Present Value Models,"
3122490, Harvard University Department of Economics.
- John Y. Campbell & Robert J. Shiller, 1986. "Cointegration and Tests of Present Value Models," Cowles Foundation Discussion Papers 785, Cowles Foundation for Research in Economics, Yale University.
- John Y. Campbell & Robert J. Shiller, 1986. "Cointegration and Tests of Present Value Models," NBER Working Papers 1885, National Bureau of Economic Research, Inc.
- Durlauf, Steven N. & Maccini, Louis J., 1995.
"Measuring noise in inventory models,"
Journal of Monetary Economics,
Elsevier, vol. 36(1), pages 65-89, August.
- Steven N. Durlauf & Robert E. Hall, 1989. "Bounds on the Variances of Specification Errors in Models with Expectations," NBER Working Papers 2936, National Bureau of Economic Research, Inc.
- Kenneth D. West, 1986.
"A Specification Test for Speculative Bubbles,"
NBER Working Papers
2067, National Bureau of Economic Research, Inc.
- Engsted, Tom, 1998. "Money Demand During Hyperinflation: Cointegration, Rational Expectations, and the Importance of Money Demand Shocks," Journal of Macroeconomics, Elsevier, vol. 20(3), pages 533-552, July.
- Petrovic, Pavle & Mladenovic, Zorica, 2000. "Money Demand and Exchange Rate Determination under Hyperinflation: Conceptual Issues and Evidence from Yugoslavia," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(4), pages 785-806, November.
- Engsted, Tom, 2002. " Measures of Fit for Rational Expectations Models," Journal of Economic Surveys, Wiley Blackwell, vol. 16(3), pages 301-55, July.
- Niels Haldrup, 1998. "An Econometric Analysis of I(2) Variables," Journal of Economic Surveys, Wiley Blackwell, vol. 12(5), pages 595-650, December.
- Taylor, Mark P, 1991.
"The Hyperinflation Model of Money Demand Revisited,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 23(3), pages 327-51, August.
- Taylor, Mark P, 1990. "The Hyperinflation Model of Money Demand Revisited," CEPR Discussion Papers 473, C.E.P.R. Discussion Papers.
- Hooker, Mark A., 2000. "Misspecification versus bubbles in hyperinflation data: Monte Carlo and interwar European evidence," Journal of International Money and Finance, Elsevier, vol. 19(4), pages 583-600, August.
- Engsted, Tom, 1994. "The Classic European Hyperinflations Revisited: Testing the Cagan Model Using a Cointegrated VAR Approach," Economica, London School of Economics and Political Science, vol. 61(243), pages 331-43, August.
- Bhargava, Alok, 1986. "On the Theory of Testing for Unit Roots in Observed Time Series," Review of Economic Studies, Wiley Blackwell, vol. 53(3), pages 369-84, July.
- Evans, George W, 1991. "Pitfalls in Testing for Explosive Bubbles in Asset Prices," American Economic Review, American Economic Association, vol. 81(4), pages 922-30, September.
When requesting a correction, please mention this item's handle: RePEc:hhb:aarfin:2002_002. 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: (Helle Vinbaek Stenholt)
If references are entirely missing, you can add them using this form.