Series: Working Papers. 9422.
Author: Juan Luis Vega.
Topics: Quantitative methods | Economic situation | Interest rates | Banco de España | Transmission of monetary policy.
Full document
Abstract
Using several recent tests for structural stability in regressions with I(1) variables and for the existence of cointegration in models with regime shifts, the empirical evidence available on the existence of a structural break in the Spanish long-run demand for broad money (ALP) is analysed.
Results indicate that shifts affecting the demand for ALP in recent years have substantially altered its long-run properties. As to the cause of this structural break, emphasis is placed on the role played by the increasing openness of the Spanish financial system to international markets as obstacles to free capital movements have progressively disappeared.