Inflation regimes and stabilisation policies: Spain 1962-2001
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)
Volume (Year): 27 (2003)
Issue (Month): 3 (September)
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