On Testing for Bubbles During Hyperinflations

Rubens Morita, Zacharias Psaradakis, Martin Sola and Patricio Yunis ()

Department of Economics Working Papers from Universidad Torcuato Di Tella

Abstract: We consider testing for the presence of rational bubbles during hyperinflations via an analysis of the non-stationarity properties of relevant observable time series. The testing procedure is based on a Markov-regime switching model with independent stochastic changes in its intercept, error variance, and autoregressive coefficients. This model formulation allow us to disentangle fundamentals-driven changes in the drift, bubble-driven explosiveness, and volatility changes that may be fundamentals-driven and/or bubble-driven. The testing strategy is illustrated by applying it to data from hyperinflations in Argentina, Brazil, Germany, and Poland.

Keywords: Bubbles; Explosiveness; Markov-switching autoregressive model; Unit-root test. (search for similar items in EconPapers)
JEL-codes: C72 D44 D82 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2022-02
New Economics Papers: this item is included in nep-cwa, nep-ecm, nep-ets and nep-ore
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Related works:
Journal Article: On testing for bubbles during hyperinflations (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:udt:wpecon:2022_02

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