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- Title
NOMINAL AND REAL DISTURBANCES AND MONEY DEMAND IN CHINESE HYPERINFLATION.
- Authors
Tallman, Ellis W.; De-Piao Tang; Ping Wang
- Abstract
This article reexamines the dynamics of hyperinflation by allowing variability in the relative price of capital goods in units of consumption goods that reflects interactions between the real and monetary sectors. The theory generates empirically testable implications that suggest expanding the standard Caganian money demand function to include both anticipated inflation and relative price effects in a nonlinear fashion. Employing data from the post-WW II Chinese hyperinflationary episode, the empirical findings suggest that conventional econometric investigations of money demand during hyperinflation overlook important nonlinear interactions between real and monetary activities and, hence, underestimate the welfare costs of hyperinflation.
- Subjects
PRICE inflation; CONSUMPTION (Economics)
- Publication
Economic Inquiry, 2003, Vol 41, Issue 2, p234
- ISSN
0095-2583
- Publication type
Article
- DOI
10.1093/ei/cbg004