Economic history and econometrics: a cautionary note from the hyperinflation front

Abstract

We seek to add a cautionary note to the growing appetite for quantitative economic history. Our lightning rod is the money demand estimation undertaken by Michael, Nobay and Peel (MNP) (1994) over the last months of Germany's hyperinflation. MNP apply to less than eighteen months of data an econometric technique designed for long-run time series and use a questionably-defined real wage series as an inappropriate proxy for real income. Given the popularity of applying modern time-series methods to hyperinflations, MNPs work provides a timely reminder that there is no substitute for knowing the historical setting and knowing the data.