THE GERMAN HYPERINFLATION AND THE DEMAND FOR MONEY REVISITED

This paper shows that a remarkably well-defined demand for real balances exists for the German hyperinflation episode, including the final months which have previously been considered as outliers. Our econometric analysis exploits the theory of cointegration, given the obvious nonstationarity of the data. Further, we consider two likely sources of misspecification: income variability, and the necessity to distinguish between the high inflation and hyperinflation episodes.