Working Paper BETA #2007-21

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Title : Monetary hyperinflations and money essentiality.

Author(s) : Alexandre Sokic

Abstract : This paper aims at drawing new guidelines for investigation of monetary hyperinflation analysis. We propose a MIUF optimizing model and show that monetary hyperinflation can occur as a perfect foresight competitive equilibrium path only when money is essential in the sense of Scheinkman (1980). This result emerges without any ad-hoc assumption implying the inclusion of friction in the adjustment of some nominal variable. It suggests that monetary hyperinflation analysis under perfect foresight requires abandoning the Cagan money demand and adopting a demand for money respecting money essentiality.

Key-words : monetary hyperinflation, seigniorage, inflation tax, money essentiality.

JEL Classification : E31, E41