Applying a New Bubble Test for a Composite Indicator

Dieter Gerdesmeier, Hans-Eggert Reimers and Roffia Barbara
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Roffia Barbara: European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany

Folia Oeconomica Stetinensia, 2010, vol. 9, issue 1, 1-23

Abstract: The paper applies a new bubble test checking the explosiveness of asset prices, especially real stock prices, real house prices and a combination of these prices. In this study, a sample of 17 OECD industrialised countries and the euro area over the period 1969 Q1 - 2010 Q2 is investigated. The authors carry out recursive unit root to determine the beginning and the end of a period of bubble behaviour. The new test procedure finds evidence for rejecting the non-bubble hypothesis. Particularly the composite indicator includes hints of bubble situations before the actual financial crisis.

Keywords: bubbles; explosive unit root test; bubbles; explosive unit root test (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:foeste:v:9:y:2010:i:1:p:1-23:n:10

DOI: 10.2478/v10031-010-0013-7

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