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Money demand during hyperinflation and stabilization: Bulgaria, 1991-2000

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The demand for money in Bulgaria is estimated over a ten-year period (1991-2000) of high inflation and inflation uncertainty. The paper distinguishes between three well-defined sub-periods: high, variable, but not systematically accelerating inflation from 1991 until April 1996; the near-hyperinflation period from May 1996 to February 1997; and the subsequent stabilization after the adoption of a currency board. The empirical analysis utilizes a standard methodology of cointegration and error correction. The functional determinants of the demand for money change during the different sub-periods. During the hyperinflation episode, Cagan's model is employed.

Document Type: Research Article


Affiliations: The World Bank and London School of Economics. The World Bank, 1818 H Street, NW, Washington DC, 20433, USA, Email:

Publication date: July 20, 2003

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