THE GERMAN HYPERINFLATION AND THE DEMAND FOR MONEY REVISITED

This paper shows that a remarkably well-defined demand for real balanc es exists for the German hyperinflation episode, including the final m onths which have previously been considered as outliers. Our econometr ic analysis exploits the theory of cointegration, given the obvious no nstationarity 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.