Search Result

Srl

Item

ID: 143417

Interest rate, money demand and seigniorage: the Chinese hyperinflation 1946–1949 / Zhao, Liuyan; Li, Lianfa

Zhao, Liuyan	Article
	0 Rating(s) & 0 Review(s)

Summary/Abstract

The lack of an observable variable measuring inflationary expectation has been a major difficulty in empirical work on hyperinflation. In this paper we propose a direct measure of expectations—the black-market interest rate in Shanghai—and study the behavior of money demand in the Chinese hyperinflation. Although the log–log schedule may provide an accurate description of money demand with relatively low interest rate, the pattern of seigniorage collected in the highest hyperinflation is consistent with the prediction of the semi-log schedule. The comparison of the seigniorage actually collected with the maximum steady state level shows that the economy might be on the increasing side of the Laffer curve except for the concluding stage of the hyperinflation. This suggests that the Chinese hyperinflation has been driven mainly by the government's quest for revenue.

Key Words

Money Demand ; Hyperinflation ; Seigniorage

In Basket

Export

ID: 156464

Stock returns under hyperinflation: evidence from China 1945–48 / Zhao, Liuyan

Zhao, Liuyan	Journal Article
	0 Rating(s) & 0 Review(s)

Summary/Abstract

This paper presents new evidence for the Fisher hypothesis, which states a positive relationship between nominal stock returns and inflation. We introduce a new data set from the episode of hyperinflation that occurred in China after World War II. To establish the reliability of our estimates we consider different frequencies, and time horizons and econometric models. The results reveal that stocks were a complete hedge against expected inflation and a partial hedge against unexpected inflation. In contrast to the empirical literature on the ‘stock return-inflation puzzle’, we find that the Fisher hypothesis is applicable to common stocks even with a short-horizon in the Chinese hyperinflation context.

Key Words

Stock Return ; Hyperinflation ; The Fisher Hypothesis

In Basket

Export