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Testing for multiple bubbles: historical episodes on the sustainability of public debt in Spain, 1850–2020

Author

Listed:
  • Vicente Esteve
  • María A. Prats

Abstract

Purpose - This paper aims to analyze the dynamics of the Spanish public debt–gross domestic product ratio during the period 1850–2020. Design/methodology/approach - This study uses a recent procedure to test for recurrent explosive behavior (Phillipset al., 2011; Phillipset al., 2015a, 2015b) to identify episodes of explosive public debt dynamics and also the episodes of fiscal adjustments over this long period. Findings - The identified episodes of explosive behavior of public debt coincided with fiscal stress events, whereas fiscal adjustments and changes in economic policies stabilized public finances after periods of explosive dynamics of public debt. Originality/value - The longer than usual span of the data should allow the authors to obtain some more robust results than in most of previous analyses of long-run sustainability.

Suggested Citation

  • Vicente Esteve & María A. Prats, 2022. "Testing for multiple bubbles: historical episodes on the sustainability of public debt in Spain, 1850–2020," Applied Economic Analysis, Emerald Group Publishing Limited, vol. 31(91), pages 1-18, March.
    • Handle: RePEc:eme:aeapps:aea-01-2021-0003
    DOI: 10.1108/AEA-01-2021-0003
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    Citations

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    Cited by:

    1. Esteve, Vicente & Prats, María A., 2023. "Testing explosive bubbles with time-varying volatility: the case of Spanish public debt," LSE Research Online Documents on Economics 116980, London School of Economics and Political Science, LSE Library.
    2. Emilio Congregado & Carmen Díaz-Roldán & Vicente Esteve, 2023. "Deficit sustainability and fiscal theory of price level: the case of Italy, 1861–2020," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 50(3), pages 755-782, August.
    3. Vicente Esteve & María A. Prats, 2022. "Testing explosive bubbles with time-varying volatility: The case of the Spanish public debt, 1850?2021," Working Papers 2205, Department of Applied Economics II, Universidad de Valencia.
    4. Esteve, Vicente & Prats, María A., 2023. "Testing explosive bubbles with time-varying volatility: The case of Spanish public debt," Finance Research Letters, Elsevier, vol. 51(C).

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