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Process Consistency and Monetary Reform: Further Evidence and Implications


  • Robert P. Flood
  • Peter M. Garber


In this paper we provide additional evidence that process consistency may have materialized as a restrictive constraint on the money generation process. In addition to recomputing the time series of process consistency probabilities using new data from the German case, we also supply our empirical technique to the data from the other hyperinflations studied by Cagan. We interpret our results as evidence hearing on the type of transversality condition studied by Brock or by Brock and Scheinkman as a sufficient condition to insure a unique equilibrium in optimizing models with perfect foresight and money.

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  • Robert P. Flood & Peter M. Garber, 1981. "Process Consistency and Monetary Reform: Further Evidence and Implications," NBER Working Papers 0635, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:0635
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    References listed on IDEAS

    1. Bomberger, W A & Makinen, G E, 1980. "Indexation, Inflationary Finance, and Hyperinflation: The 1945-1946 Hungarian Experience," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 550-560, June.
    2. Starr, Ross M, 1974. "The Price of Money in a Pure Exchange Monetary Economy with Taxation," Econometrica, Econometric Society, vol. 42(1), pages 45-54, January.
    3. Barro, Robert J, 1970. "Inflation, the Payments Period, and the Demand for Money," Journal of Political Economy, University of Chicago Press, vol. 78(6), pages 1228-1263, Nov.-Dec..
    4. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
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