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On the Explosive Nature of Hyper-Inflation Data

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  • Nielsen, Bent

Abstract

Empirical analyses of Cagan?s money demand schedule for hyper-inflation have largely ignored the explosive nature of hyper-inflationary data. It is argued that this contributes to an (i) inability to model the data to the end of the hyper-inflation, and to (ii) discrepancies between ?estimated? and ?actual? inflation tax. A simple solution to these issues is found by replacing the conventional measure of inflation by the cost of holding money.

Suggested Citation

  • Nielsen, Bent, 2008. "On the Explosive Nature of Hyper-Inflation Data," Economics Discussion Papers 2008-9, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwedp:7210
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    References listed on IDEAS

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    1. 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.
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    6. Goldfeld, Stephen M. & Sichel, Daniel E., 1990. "The demand for money," Handbook of Monetary Economics,in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 1, chapter 8, pages 299-356 Elsevier.
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    Cited by:

    1. Laporte, Audrey & Dass, Adrian Rohit & Ferguson, Brian S., 2017. "Is the Rational Addiction model inherently impossible to estimate?," Journal of Health Economics, Elsevier, vol. 54(C), pages 161-175.
    2. Katarina Juselius, 2009. "Time to reject the privileging of economic theory over empirical evidence? A Reply to Lawson (2009)," Discussion Papers 09-16, University of Copenhagen. Department of Economics.
    3. Ahumada, Hildegart A. & Garegnani, Maria Lorena, 2012. "Forecasting a monetary aggregate under instability: Argentina after 2001," International Journal of Forecasting, Elsevier, vol. 28(2), pages 412-427.
    4. Jusélius, Katarina, 2009. "Special Issue on Using Econometrics for Assessing Economic Models: An Introduction," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 3, pages 1-20.

    More about this item

    Keywords

    Cost of holding money; co-explosiveness; co-integration; explosive processes; hyper-inflation;

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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