Convergence of inflation with a common cycle: estimating and modelling Spanish historical inflation from the 16th to the 18th centuries

José Luis Cendejas Bueno and Cecilia Font de Villanueva

Empirical Economics, 2015, vol. 48, issue 4, 1643-1665

Abstract: The aim of this paper is twofold. First, to obtain inflation rates for the four regions of Spain analysed for the period 1501–1800 by modelling Hamilton’s (American treasure and the price revolution in Spain, 1934 ; War and prices in Spain, 1947 ) price index series by means of an unobserved component model with a common cyclical factor. And second, to prove their long-term convergence process. Therefore, convergence concerns both the cyclical variation of inflation rates common to the four regions, and trend inflation. A complete convergence of the trend inflation occurred once the monetary reforms of Charles II of Spain were introduced in order to redress the previous monetary instability known as inflation of the vellón. The predominance of the vellón in small change and the concentration of the influx of silver when inflation was comparatively lower (second half of the sixteenth century and the seventeenth century) complicate to reach simple conclusions on the monetary origin of inflation exclusively based on precious metals, but, on the contrary, suggest a monetary origin based on copper coin and fiscal distortions. So, monetary stability proved to be a necessary condition for inflation convergence and the fulfilment of the purchasing power parity condition along the eighteen century. Copyright Springer-Verlag Berlin Heidelberg 2015

Keywords: Convergence of inflation; Common cyclical factor; Unobserved component models; Hamilton’s price series; Inflation of the vellón; C32; E31; E32; E42 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://hdl.handle.net/10.1007/s00181-014-0840-8 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:empeco:v:48:y:2015:i:4:p:1643-1665

Ordering information: This journal article can be ordered from
http://www.springer. ... rics/journal/181/PS2

DOI: 10.1007/s00181-014-0840-8

Access Statistics for this article

Empirical Economics is currently edited by Robert M. Kunst, Arthur H.O. van Soest, Bertrand Candelon, Subal C. Kumbhakar and Joakim Westerlund

More articles in Empirical Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().