Inflation, Money Growth, and I(2) Analysis

Katarina Juselius

No 04-31, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: The paper discusses the dynamics of inflation and money growth in a stochastic framework, allowing for double unit roots in the nominal variables. It gives some examples of typical I(2) ’symptoms’ in empirical I(1) models and provides both a nontechnical and a technical discussion of the basic differences between the I(1) and the I(2) model. The notion of long-run and medium-run price homogeneity is discussed in terms of testable restrictions on the I(2) model. The Brazilian high inflation period of 1977:1-1985:5 illustrates the applicability of the I(2) model and its usefulness to address questions related to inflation dynamics.

Keywords: cointegrated VAR; price homogeneity; Cagan model; hyper inflation (search for similar items in EconPapers)
JEL-codes: C32 E31 E41 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2004-12
New Economics Papers: this item is included in nep-cba, nep-ecm, nep-mac and nep-mon
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Chapter: Inflation, Money Growth, and 1(2) Analysis (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:0431

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