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Applying a New Bubble Test for a Composite Indicator

Author

Listed:
  • Gerdesmeier Dieter

    (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany)

  • Reimers Hans-Eggert

    (Hochschule Wismar, Postfach 1210, 23952 Wismar)

  • Roffia Barbara

    (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany)

Abstract

The paper applies a new bubble test checking the explosiveness of asset prices, especially real stock prices, real house prices and a combination of these prices. In this study, a sample of 17 OECD industrialised countries and the euro area over the period 1969 Q1 - 2010 Q2 is investigated. The authors carry out recursive unit root to determine the beginning and the end of a period of bubble behaviour. The new test procedure finds evidence for rejecting the non-bubble hypothesis. Particularly the composite indicator includes hints of bubble situations before the actual financial crisis.

Suggested Citation

  • Gerdesmeier Dieter & Reimers Hans-Eggert & Roffia Barbara, 2010. "Applying a New Bubble Test for a Composite Indicator," Folia Oeconomica Stetinensia, Sciendo, vol. 9(1), pages 1-23, January.
    • Handle: RePEc:vrs:foeste:v:9:y:2010:i:1:p:1-23:n:10
    DOI: 10.2478/v10031-010-0013-7
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    References listed on IDEAS

    as
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