Testing explosive bubbles with time-varying volatility: The case of the Spanish public debt, 1850?2021

Vicente Esteve and Maria Prats
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Vicente Esteve: Universidad de Valencia and Universidad de Alcalá, Spain

No 2205, Working Papers from Department of Applied Economics II, Universidad de Valencia

Abstract: In this paper the dynamics of the Spanish public debt-GDP ratio is analysed during the period 1850-2021. We use recent procedures to test for explosive bubbles in the presence under time-varying volatility (Harvey, Leybourne, Sollis and Taylor (2016), Harvey, Leybourne and Zu (2019, 2020), Kurozumi, Skorobotov and Tsarev (2022)) in order to test the explosive behavior of Spanish public debt over this long period. We extend previous analysis of Esteve and Prats (2022) where assume constant unconditional volatility in the underlying error process.

Keywords: Public debt; Rational bubble; Explosive autoregression; Time-varying volatility; Right-tailed unit root testing (search for similar items in EconPapers)
JEL-codes: C12 C22 E62 H62 H63 (search for similar items in EconPapers)
Date: 2022-09
New Economics Papers: this item is included in nep-fdg and nep-his
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