Abstract
A discrete time approximation to the continuous time hyper-inflation model of Sargent and Wallace (1993) in which the authorities finance a given budget deficit by printing money appears to admit the possibility of chaotic solutions. In this paper we investigate the time series properties of daily observations on the Pound Reichsmark spot exchange rate in the inter-war hyper-inflation period. Our empirical analysis is suggestive that spot rates were generated by a non-linear possibly chaotic process.
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We are grateful to L Allsopp, K White and J Sandhu for excellent research assistance. Also for comments from participants at the National University of Singapore and an anonymous referee and the editor of the journal. Needless to say remaining errors are our responsibility. The research was partly supported by the Leverhulme trust to whom we are grateful.
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Peel, D.A., Yadav, P. The time series behaviour of spot exchange rates in the German hyper-inflation period: (Was the process chaotic?). Empirical Economics 20, 455–471 (1995). https://doi.org/10.1007/BF01180676
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DOI: https://doi.org/10.1007/BF01180676