Abstract
Cagan’s “Paradox” suggests monetary authorities print notes at rates exceeding the seignorage maximizing rate during a hyperinflation. Estimates of a Cagan-type money demand function during Zimbabwe’s recent hyperinflation suggest Reserve Bank staff generally operated below that rate. The seignorage maximizing rates derive from a short-run Structural Vector Autoregression (SVAR) applied to monthly inflation rates imputed from the parallel market exchange rate and monetary base or currency. The SVAR approach applies because tests indicate real balances and inflation exhibit trend-stationarity, rather than non-stationarity. Tests also indicate that real balances Granger-cause inflation, but inflation does not Granger-cause real balances.
Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
