Universidad de Alcalá. Instituto Universitario de Análisis Económico y Social
Abstract
33 p.In this article, we test a classical model of ináation with rational expectations for the case of Spain during the period 1830ñ1998. The principal
testable implication is that money growth and ináation are cointegrated
ruling out speculative bubbles. First, to detect episodes of potential explosive behaviour in the Spanish ináation 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 ináation 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)
