Abstract
This paper provides evidence that casts doubt on the conclusioon of several studies of the German hyperinflation that, since government raised most of its revenue from money creation, the money supply process was endogenous. This conclusion in the literature is based on the assumption that the money supply and the price level can be described by linear ARIMA models. It is shown here that the linearity assumption is violated by the data and that relaxing this assumption reverses the earlier results. The paper provides additional evidence in support of the finding that the money supply process may be exogenous.
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