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

Hing Lin CHAN, Kai Yin Woo

    Research output: Contribution to journalJournal articlepeer-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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