Resource title

On the Explosive Nature of Hyper-Inflation Data

Resource image

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Resource description

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. Using data from the extreme Yugoslavian hyper-inflation it is shown that a linear analysis of levels of prices and money fails in addressing these issues even when the explosiveness is taken into account. The explanation is that log real money has random walk behaviour while the growth of log prices is explosive. A simple solution to these issues is found by replacing the conventional measure of inflation by the cost of holding money.

Resource author

Bent Nielsen

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/18034

Resource license

Adapt according to the presented license agreement and reference the original author.