Abstract
The theory of inflation and its effects on economic variables such as exchange rates and rates of change in the money stock has been developed to a large extent within the last twenty years. The recent inflationary pressure over the entire globe beginning in the late 1960's has further spurred interest in this area. In this study, we will focus on the historically interesting time period of post World War I. Several European nations suffered massive inflation during that time and 3 of those nations, Germany, Hungary, and Poland will form the basis for the discussion. This study involves 3 interdependent parts. First, the causal relationship existing between several economic variables is studied in order to determine the lead/lag relationship as well as determining which variables appear to be statistically exogenous. Several hypotheses regarding the expected results of the causality tests are reviewed and a dynamic form of the familiar purchasing power parity theory is tested. The results tend to confirm the recent inflationary finance models and reject the dynamic parity theory. The second section develops an empirical method of determining an expectations variable. A time series technique, specifically Box-Jenkins analysis, is utilized in achieving an optimal predictor of inflation for use as an expectations variable. The method is briefly described and its use is defended through a review of the existing expectation determinations literature and a comparison of results from large scale econometric forecasting models with the Box-Jenkins approach. The expectations series for inflation and exchange rates are then calculated..
Pautler, Paul Anthony (1978). A study of causal relationships, expectations, and the demand for money during three hyperinflations. Texas A&M University. Texas A&M University. Libraries. Available electronically from
https : / /hdl .handle .net /1969 .1 /DISSERTATIONS -638106.