2003. július 18. Paál Beatrix: Measuring the Inflation of Paralell Currencies: An Empirical Reevaluation of the Second Hungarian Hyperinflationnyomtatás
2003 július 18.
Paál Beatrix (Stanford University)
Measuring the Inflation of Paralell Currencies: An Empirical Reevaluation of the Second Hungarian Hyperinflation
During the hyperinflation of 1945-46, the Hungarian government issued two types of money-like liabilities with differing rates of return: a traditional non-indexed currency (called the Pengő), and an indexed central bank liability (called the Tax Pengő). In this paper I reexamine the empirical characteristics of the Hungarian hyperinflation using a definition of the money supply that includes both of these components. I argue that regulations limited the degree of substitutability between these two classes of money. This suggests a specific way of aggregating the indexed and non-indexed components of the money supply, and implies that the appropriate measure of currency depreciation is the decline in the purchasing power of this aggregate. When the inflationary process is represented using the proposed aggregate measures, some of the empirical anomalies traditionally associated with the second Hungarian hyperinflation are readily resolved. In particular, (1) the magnitude of the inflation appears much less extreme than previously thought, (2) seigniorage income remains positive throughout the episode, and (3) unilateral Granger-causality from inflation to money creation, observed during most other hyperinflations, is verified for the entire episode.