Bubbles detection for inter-war European hyperinflation: A threshold cointegration approach

Hing Lin CHAN, Kai Yin Woo

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

This paper undertakes an empirical investigation into the existence of inflationary bubbles during the inter-war European hyperinflation for Germany, Hungary, Poland and Russia. Our Monte Carlo simulations show that the residual-based threshold cointegration methodology of Caner and Hansen (2001) is better able to detect periodically collapsing bubbles. Moreover, this methodology possesses greater power against nonlinear stationary alternatives in a finite sample than several commonly used cointegration tests that do not allow for multiple regime shifts. The empirical results of the threshold cointegration tests provide evidence of stationary, regime-switching processes in money demand dynamics, but suggest that there are no inflationary bubbles in any of the countries.

Original languageEnglish
Pages (from-to)169-185
Number of pages17
JournalJournal of Economics and Finance
Volume30
Issue number2
DOIs
Publication statusPublished - 2006

Scopus Subject Areas

  • Finance
  • Economics and Econometrics

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