Monetary hyperinflations and money essentiality
This paper aims at drawing new guidelines for investigation of monetary hyperinflation analysis. We propose a MIUF optimizing model and show that monetary hyperinflation can occur as a perfect foresight competitive equilibrium path only when money is essential in the sense of Scheinkman (1980). This result emerges without any ad-hoc assumption implying the inclusion of friction in the adjustment of some nominal variable. It suggests that monetary hyperinflation analysis under perfect foresight requires abandoning the Cagan money demand and adopting a demand for money respecting money essentiality.
|Date of creation:||2007|
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- Kiguel, Miguel A, 1989. "Budget Deficits, Stability, and the Monetary Dynamics of Hyperinflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(2), pages 148-157, May.
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- Maurice Obstfeld & Kenneth Rogoff, 1982. "Speculative Hyperinflations in Maximizing Models: Can We Rule Them Out?," NBER Working Papers 0855, National Bureau of Economic Research, Inc.
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- Brock, William A., 1975. "A simple perfect foresight monetary model," Journal of Monetary Economics, Elsevier, vol. 1(2), pages 133-150, April.
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- Willem H. Buiter, 1985. "A Fiscal Theory of Hyperdeflations? Some Surprising Monetarist Arithmetic," NBER Technical Working Papers 0052, National Bureau of Economic Research, Inc.
- María-José Gutiérrez & Jesús Vázquez, 2004. "Explosive Hyperinflation, Inflation-Tax Curve, and Modeling the Use of Money," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 160(2), pages 311-311, June.
- de Holanda Barbosa, Fernando & Barros da Cunha, Alexandre, 2003. "Inflation tax and money essentiality," Economics Letters, Elsevier, vol. 78(2), pages 187-195, February.
- Vazquez, Jesus, 1998. "How high can inflation get during hyperinflation? A transaction cost demand for money approach," European Journal of Political Economy, Elsevier, vol. 14(3), pages 433-451, August. Full references (including those not matched with items on IDEAS)
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