The Yugoslav Hyperinflation of 1992-1994: Causes, Dynamics, and Money Supply Process
19 Pages Posted: 10 Apr 2011 Last revised: 31 Jul 2013
Date Written: December 23, 1998
The paper demonstrates that the Yugoslav hyperinflation, the second highest and the second longest episode in economic history, was driven by excessive money supply that monetized various deficits that emerged upon the disintegration of the country. The identified cointegrating relations showed that money growth was weakly exogenous and affected inflation via currency depreciation. This indicates the presence of exchangerate-based pricing, whereas the exogeneity of money implies that money was the common stochastic trend fueling currency depreciation and inflation. Money growth itself followed a random walk with a drift, which, together with its exogeneity, was a result of the Central Bank’s loss of control over the money supply process.
Keywords: Hyperinflation, Yugoslav inflation, inflation stabilization, Yugoslavia, Serbia and Montenegro
JEL Classification: E31,E51,P27
Suggested Citation: Suggested Citation