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On testing for bubbles during hyperinflations

Author

Listed:
  • Morita Rubens

    (School of Economics, University of Bristol, Bristol, UK)

  • Psaradakis Zacharias

    (Department of Economics, Mathematics and Statistics, Birkbeck, University of London, London, UK)

  • Sola Martin

    (Department of Economics, Universidad Torcuato di Tella, Buenos Aires, Argentina)

  • Yunis Patricio

    (Department of Economics, Universidad Torcuato di Tella, Buenos Aires, Argentina)

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 test 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 methodology is illustrated by applying it to data from hyperinflations in Argentina, Brazil, Germany and Poland.

Suggested Citation

  • Morita Rubens & Psaradakis Zacharias & Sola Martin & Yunis Patricio, 2024. "On testing for bubbles during hyperinflations," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 28(1), pages 25-37, February.
    • Handle: RePEc:bpj:sndecm:v:28:y:2024:i:1:p:25-37:n:3
    DOI: 10.1515/snde-2022-0014
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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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