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Inflation regimes and stabilisation policies: Spain 1962-2001

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Abstract

After reaching high levels in the 1970s and 1980s, inflation in Spain is significantly lower in the early 2000s. This paper estimates a switching-regime model for that variable. Our results point towards the existence of three regimes across which the average and the volatility of inflation are positively correlated. Major movements from high and volatile inflation to low and more stable inflation are identified around 1978, 1990 and 1995, when relevant economic policy decisions were made. Our empirical results also help to explain the relatively long-lived episodes of over and under prediction of Spanish inflation without requiring any sort of agents' irrationality. (Copyright: Fundación SEPI)

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File URL: ftp://ftp.fundacionsepi.es/InvEcon/paperArchive/Sep2003/v27i3a7.pdf
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Bibliographic Info

Article provided by Fundación SEPI in its journal Investigaciones Economicas.

Volume (Year): 27 (2003)
Issue (Month): 3 (September)
Pages: 615-631

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Handle: RePEc:iec:inveco:v:27:y:2003:i:3:p:615-631

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Postal: Investigaciones Economicas Fundación SEPI Quintana, 2 (planta 3) 28008 Madrid Spain
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Related research

Keywords: Switching-regime models; inflation expectations.;

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References

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  1. Evans, Martin & Wachtel, Paul, 1993. "Inflation Regimes and the," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(3), pages 475-511, August.
  2. Hansen, Bruce E, 1992. "The Likelihood Ratio Test under Nonstandard Conditions: Testing the Markov Switching Model of GNP," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(S), pages S61-82, Suppl. De.
  3. Nicholas Ricketts & David Rose, . "Inflation, Learning And Monetary Policy Regimes In The G-7 Economies," Working Papers 95-6, Bank of Canada.
  4. Bidarkota, Prasad V, 2001. "Alternative Regime Switching Models for Forecasting Inflation," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 20(1), pages 21-35, January.
  5. Dahl Christian M. & Hansen Niels L., 2001. "The Formation of Inflation Expectations under Changing Inflation Regimes," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 4(4), pages 1-31, January.
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Cited by:
  1. Amisano, Gianni & Fagan, Gabriel, 2013. "Money growth and inflation: A regime switching approach," Journal of International Money and Finance, Elsevier, vol. 33(C), pages 118-145.

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