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Long-run neutrality of money and inflation in Spanish economy, 1830-1998

Author

Listed:
  • Rafael Emilio Congregado

    (Universidad de Huelva, Spain)

  • Vicente Esteve

    (Departamento de Economia Aplicada II, Universidad de Valencia, Avda. dels Tarongers, s/n, 46022 Valencia, Spain)

Abstract

In this article, we test a classical model of inflation with rational expec- tations for the case of Spain during the period 1830?1998. The principal testable implication is that money growth and inflation are cointegrated ruling out speculative bubbles. First, to detect episodes of potential explosive behaviour in the Spanish in?ation rate, we use the recursive unit root tests for explosiveness recently proposed by Phillips, Wu, and Yu (2011), and Phillips, Shi, and Yu (2015a,b). Second, we consider the possibility that a linear cointegrated regression model with multiple structural changes would provide a good empirical description of the classical model of in?ation for Spain over this long period. Our methodology is based on the instability tests recently proposed in Kejriwal and Perron (2008, 2010) as well as the cointegration tests developed in Arai and Kurozumi (2007) and Kejriwal (2008).

Suggested Citation

  • Rafael Emilio Congregado & Vicente Esteve, 2021. "Long-run neutrality of money and inflation in Spanish economy, 1830-1998," Working Papers 2104, Department of Applied Economics II, Universidad de Valencia.
  • Handle: RePEc:eec:wpaper:2104
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Classical model of in?ation; Money demand; Money growth; In?ation; Explosiveness; Cointegration; Multiple structural breaks;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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