Work on testing for bubbles has caused much debate, much of which has focused on methodology. Monte Carlo simulations reported in Evans (1991) showed that standard tests for unit roots and cointegration frequently reject the presence of bubbles even when such bubbles are present by construction....

We don't have an abstract yet, sorry. But I think the title is pretty descriptive.

In this paper, we use an extension of Hamilton's (1989) Markov switching techniques to describe and analyze stock market returns. Using new tests, we find very strong evidence of switching behaviour. A major innovation of our work is to use a multivariate specification which allows us to examine...

This paper tests between fads and bubbles using a new empirical strategy (based on switching regression econometrics) for distinguishing between competing asset pricing models. By extending the Blanchard and Watson (1982) model, we show how stochastic bubbles can lead to regime switching in...

This paper develops a new test for speculative bubbles, which is applied to data for the Japanese yen, the German mark and the Canadian dollar exchange rates from 1977 to 1991. The test assumes that bubbles display aparticular kind of regime-switching behaviour, which is shown to imply...

This paper is a user's guide to a set of Gauss procedures developed at the Bank of Canada for estimating regime-switching models. The procedures can estimate relatively quickly a wide variety of switching models and so should prove useful to the applied researcher. Sample program listings are...

This paper explores two very different models which might account for stock market crashes. A key innovative feature of our paper is that we use the models to show how their implications for stock market crashes may be tested using switching-regression econometrics. We are careful to show that...

In order for time series estimates of the output gap to be useful to policy makers, this paper argues that two factors will be critical. First, they must be able to produce an estimate of the current output gap based only on past information. Put another way, to evaluate the performance of such...

Simulation evidence is presented on the finite sample properties of two tests for stationarity recently proposed by Kwiatkowski, Phillips and Schmidt (1991) and Park (1990). Unlike earlier unit-root tests, these test the null of stationarity against the alternative of a unit root, thereby...

We examine whether a link exists between oil price shocks and the U.S. real effective exchange rate. The results show that the two variables appear to be cointegrated and that causality runs from oil prices to the exchange rate and not vice versa. The single-equation error-correction model...