Serbian foreign exchange market during 2004-2008

This paper shows firstly that the money-in-the-utility-function model presents exactly the same kind of limitations as the cash-in-advance model for characterizing explosive hyperinflation. These limitations relate to sufficient money essentiality in the sense of Scheinkman (1980). Thereby, this paper contributes to the understanding of the Cagan inflationary finance models failure with perfect foresight. Secondly, the paper provides theoretical support to alternative functional forms of money demand that may be give an alternative to the failure of Cagan based inflationary finance model for the analysis of explosive hyperinflation. Theoretical support is brought to inelastic functional forms of money demand and specifically to the double-log schedule.