A MULTIVARIATE I(2) COINTEGRATION ANALYSIS OF GERMAN HYPERINFLATION
Dimitris Georgoutsos and
Georgios Kouretas ()
No 1, Working Papers from University of Crete, Department of Economics
This paper re-examines the Cagan model of German hyperinflation during the 1920s under the twin hypotheses that the system contains variables that are I(2) and that a linear trend is required in the cointegrating relations. Using the recently developed I(2) cointegration analysis developed by Johansen (1992, 1995, 1997) extended by Paruolo (1996) and Rahbek et al. (1999) we find that the linear trend hypothesis is rejected for the sample. However, we provide conclusive evidence that money supply and the price level have a common I(2) component. Then, the validity of Cagan’s model is tested via a transformation of the I(2) to an I(1) model between real money balances and money growth or inflation. This transformation is not imposed on the data but it is shown to satisfy the statistical property of polynomial cointegration. Evidence is obtained in favor of cointegration between the two sets of variables which is however weakened by the sample dependence of the trace test that the application of the recursive stability tests for cointegrated VAR models show.
Keywords: I(2) analysis; hyperinflation; cointegration; identification; temporal stability (search for similar items in EconPapers)
JEL-codes: C12 C32 F31 F33 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2000, Revised 2001-07
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://economics.soc.uoc.gr/wpa/docs/afe.pdf Revised version (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to economics.soc.uoc.gr:443 (Bad file descriptor) (http://economics.soc.uoc.gr/wpa/docs/afe.pdf [302 Found]--> https://economics.soc.uoc.gr/wpa/docs/afe.pdf)
Journal Article: A Multivariate I(2) cointegration analysis of German hyperinflation (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:crt:wpaper:0001
Access Statistics for this paper
More papers in Working Papers from University of Crete, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Kostis Pigounakis ().