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The monetary analysis of hyperinflation and the appropriate specification of the demand for money

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  • Sokic, Alexandre

Abstract

The paper emerges from the failure of the traditional models of hyperinflation with rational expectations or perfect foresight. Using the insights from two standard optimizing monetary settings the paper shows that the possibility of perfect foresight monetary hyperinflation paths depends robustly on the essentiality of money. We show that the popular semilogarithmic form of the demand for money is not appropriate to analyse monetary hyperinflation with perfect foresight. We propose a simple test of money essentiality for the appropriate specification of the demand for money equation in empirical studies of hyperinflation.

Suggested Citation

  • Sokic, Alexandre, 2010. "The monetary analysis of hyperinflation and the appropriate specification of the demand for money," MPRA Paper 21503, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:21503
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    References listed on IDEAS

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    Cited by:

    1. Zhao, Liuyan, 2017. "The behavior of money demand in the Chinese hyperinflation," China Economic Review, Elsevier, vol. 42(C), pages 145-154.
    2. Sokic, Alexandre & FABRIS, Nikola, 2013. "Euroization and cyclical stabilization in Montenegro: an empirical analysis," MPRA Paper 46537, University Library of Munich, Germany.

    More about this item

    Keywords

    monetary hyperinflation; inflation tax; money essentiality;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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