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Examining the relationships between revenues and their components and expenditures and their components using Markov-Switching regressions. Evidence from the municipality of Coimbra (1557–1836)
Abstract
The present work aims to evaluate quantitatively the relationships between revenues and their components and expenditures and their components in the Municipality of Coimbra during the Early Modern era (1557–1836), according to the revenue and expenditure books of the Municipality of Coimbra. To examine the proposed relationships, we apply the Markov-Switching regression techniques. It is shown that the Markov-Switching analysis allows a different perception of changing regimes in municipal accounting. The analysis reveals that most accounting components had a significant impact on revenues and expenditures in the short and long term. It is argued that the lack of technological innovation that occurred at the level of accounting recording technologies had no impact on the evolution of revenue, expenditure, and its components. Our empirical results are important to motivate the debate on accounting methods, highlighting the importance of long-term dynamic analysis as opposed to short-term static views.
... These were not understood as transfers to the central state revenues, because the funds of the terças had to be spent on defensive works or, with royal license, on repairs of almshouses and hospitals. There were, however exemptions, as some municipalities were relieved of its payment during times of war, and there is at least one important municipality (Coimbra) that was exempted from it (Barbosa et al., 2022). The values of the tax farms of the terça for the whole kingdom in the period 1621-1688 (Oliveira 2013, p. 325) represent about one-quarter of the total municipal revenues estimated. ...
... While the data for Porto confirm the broad picture contained in table 5, it should be observed that Porto was a large city and its commercial, naval, and administrative importance justified transfers from the central state and for a higher role of military expenditure (Valente 2008, p. 82;Costa 2018, p. 282). The municipality of Coimbra provides the best documented case over a long period of time (Barbosa et al., 2022;Barbosa 2023) and was more representative of the situation of municipalities across the country, as it lacked Porto's strategic value and size. Moreover, the sources from Coimbra allow us to isolate the critical expenditure variable: non-defense public goods. ...
... The high share of local budgets committed to non-defense public goods compensated the small size of the municipal contribution to overall expenditure. Nevertheless, the role of municipalities as providers of Barbosa et al., (2022); overall local budgets from the sources given in table 4; wages from the sources given in table 1; central expenditure from figure 4. Notes: We define public goods as justice, administration, and public works. This data is based mainly on Coimbra, for which we have uniform and good quality data from the mid-sixteenth century onwards (Barbosa et al., 2022). ...
We provide a blueprint for constructing measures of state capacity in premodern states, offering several advantages over the current state of the art. We argue that assessing changing state capacity requires considering the composition of revenues, expenditure patterns, and local-level budgets. As an application, we examine the case of Portugal (1367–1844). Our findings demonstrate that throughout most of this extended period, Portugal maintained comparatively high fiscal and legal capacities. This challenges claims that Portugal’s economic decline from the second half of the eighteenth century was due to low state capacity.
... In the sixteenth and seventeenth centuries it was well established in important municipalities, such as those of Porto and Coimbra (Silva, 1985;Barbosa, Moutinho and Silva, 2022), and by the eighteenth century it was the main collection model for virtually all municipalities (Soares 1984, 96;Mota 1990, 117;Capela 1995, 202-203, 217;Ribeiro 1998, 212;Fernandes 1999, 65-66;Fonseca 2002, 359;Barbosa 2017, 196-200). ...
This study aims to analyse revenue collection contracts in the municipality of Coimbra (Portugal), from 1557 to 1836. It will focus on examining the role of transaction costs and risk in contract selection. It is documented that from the sixteenth century to the early nineteenth century, the municipality of Coimbra used three types of contracts with private contractors, namely fixed-price, salary, and sharing contracts, although most were of the fixed-price type. The central question explored here is the influence of transaction costs and risk on the decision-making process for indirect collection contracts. The findings indicate that the municipality aimed to minimize both transaction costs and risk, leading mainly to the use of fixed-price contracts. In this arrangement, the agents (revenue contractors) bore responsibility for both the risk and the costs associated with the collection process. From 1739 onwards, the municipality shifted to direct rather than indirect collection methods, introducing additional constraints.
... A recent study points to a crisis in Coimbra's municipal finances that began in the 17 th century and culminated in a decrease in revenue and expenditure. In general terms, it characterises a transition from a regime of expansion to one of contraction that led to a long decline in revenue and, consequently, expenditure from the 17 th century to the early 19 th century (a 150-year decline in revenue and expenditure, followed by recovery) (Barbosa et al. 2022). Although the study associates some revenue and expenditure components with regime changes, the causes of this decadence remain unclear. ...
This article aims to analyse the finances of the Coimbra city council from 1557 to 1836. Our objective is to examine the causes of long-term changes in municipal revenue and expenditure, particularly during the extended period of decline that occurred between the mid-17 th century and the late 18 th century. This study will focus on the composition of revenue and expenditure, as well as on revenue collection mechanisms. We aim to present the empirical data on the revenue and expenditure components that allow us to understand the changes that took place. Finally, we hope to be able to explain the causes that led to significant variations in revenue and expenditure in a dialogue with existing literature. The primary sources used correspond to municipal revenue and expenditure books, supplemented by other sources such as legislation, correspondence and auction books.
Listed below are 2022 publications, in English, within the general area of accounting history. The definition of what constitutes an accounting history article is not always a straightforward matter, and the description has been interpreted fairly broadly to include any accounting publication with a significant historical input. Malcolm Anderson’s bibliographies from 2010 and through 2016 form the basis for the search terms used to gather these publications. For business history articles, see Business History. For a review of financial history publications, see Financial History Review.
O presente estudo pretende analisar as despesas da Câmara Municipal de Coimbra, entre 1762 e 1820. Trata-se de um período de grandes dificuldades para a gestão camarária coimbrã, que levou a algumas alterações significativas na forma de arrecadar as receitas, o que permitiu um crescimento dos gastos. Com recurso a uma metodologia quantitativa e comparativa, aspira-se, com esta investigação, compreender em que medida a composição e a evolução da despesa foi afetada pela evolução da receita. Pretendemos examinar a evolução da despesa e de cada uma das suas categorias individualmente, com o objetivo de apurar: qual era a estrutura das despesas da Câmara Municipal de Coimbra, entre 1762 e 1820; como evoluíram os gastos; identificar as semelhanças e diferenças existentes entre Coimbra e outras câmaras municipais do mesmo período; que continuidades e ruturas se podem traçar com a realidade financeira coimbrã do séc. XVII. O núcleo central de fontes corresponde aos Livros de Receita e Despesa, à guarda do Arquivo Histórico Municipal. Pretendemos que este estudo carreie um importante contributo para a compreensão das finanças municipais nos finais de Antigo Regime.
Early modern warfare in western Europe exposed civilian populations to violence, hardship, and disease. Despite limited empirical evidence, the ensuing mortality effects are regularly invoked by economic historians to explain patterns of economic development. Using newly collected data on adult burials and war events in the seventeenth-century Low Countries, we estimate early modern war-driven mortality in localities close to military activity. We find a clear and significant general mortality effect consistent with the localized presence of diseases. During years with major epidemic disease outbreaks, we demonstrate a stronger mortality effect. However, this effect is spatially more variable during epidemics, with excess mortality not monotonically declining with distance from warfare. Given the omnipresence of warfare in the seventeenth-century Low Countries, war-driven mortality was remarkably constant rather than a sharp discontinuity. The economic impact of warfare likely played out over the long term rather than driven by sudden large mortality spikes creating rapid structural change.
O presente estudo pretende analisar as receitas próprias da Câmara Municipal de Coimbra, entre 1762 e 1820, através dos Livros de Receita e Despesa, à guarda do Arquivo Histórico Municipal. Trata-se de um período de grandes dificuldades para a gestão camarária coimbrã, que levou à adoção de algumas estratégias e a algumas alterações significativas na forma de arrecadar as receitas. A questão central a que se pretende dar resposta, consiste em averiguar se as dificuldades de financiamento condicionavam o desempenho das suas múltiplas funções. Neste sentido, procura-se apresentar a estrutura dos rendimentos, explicando cada uma das categorias de receita, a forma como eram arrecadadas e a sua evolução ao longo da cronologia; analisar a evolução das receitas, em confronto com a evolução da despesa e dos saldos; identificar as semelhanças e diferenças entre o caso de Coimbra e o de outras câmaras municipais contemporâneas, assinalando características comuns e especificidades locais; numa análise de longa duração, elaboramos uma comparação com as finanças coimbrãs seiscentistas, indicando as continuidades e ruturas na evolução dos rendimentos concelhios. Pretendemos que este estudo carreie, igualmente, um contributo para o conhecimento da conjuntura económica de finais de Antigo Regime.
Los años inmediatos a la conquista se pueden considerar como un compás de espera hasta la definitiva reglamentación de la vida ciudadana en el año 1500 con la Carta de Privilegio, consecuencia esta de la sublevación mu dé jar que «rompió las capitulaciones». A pesar de ello funcionó un Cabildo como muestra la existencia de Actas Capitulares que datan de 1497. Sin embargo, aunque se hicieron algunas dotacio nes a la ciudad como Montejícar o la Agüela, la realidad es que hasta el año de la Carta de Privilegio no podemos hablar de la existencia de una hacienda municipal organizada. Hasta este momento los gastos de mantenimiento de la ciudad e incluso las reformas urbanísticas que se acometieron fueron sufragadas por reparto en la mayoría de los casos y en ocasiones parte por reparto y parte por las rentas de la Agüela y sólo excepcionalmente corrió el Ayuntamiento con ellos 1. 1. LA DOTACIÓN DE LA CARTA DE PRIVILEGIO. La renta de la Agüela de la que se concede a Granada la cuarta parte, renta de clara procedencia musulmana, a pesar de la atención que ha merecido no se ha esclarecido totalmente su origen y naturaleza. Isabel Alvarez de Cienfuegos ha hecho referencia a la misma, al igual que Ramón Carande y Cristóbal Espejo. Este último, el primero en estudiarla consi dera que su carácter fundamental corresponde al gravamen de ciertos actos de 1. Luna Díaz, J.: «Granada en las Actas del Cabildo municipal. Aspectos históricos de una ciudad entre dos siglos, 1497-1502». Memoria de Licenciatura inédita. Granada, 1975.
A major issue in Irish economic history is the lack of national accounts before the interwar period. This paper constructs new annual estimates of real GDP between 1842 and 1913 based on a novel two-stage econometric approach. Our results show that while living standards approximately tripled in this period, development was uneven with contractions in economic activity not only during the Great Famine but also between the late 1890s and the First World War. As a proof of concept, we also apply our methodology to Swedish data. The resulting estimates closely match existing historical national accounts.
This paper deals with the history of urban taxation in XVIIth century Castile through an study focused on Madrid. During the XVIIth century the Castilian cities granted many monetary aids (“servicios”) to the Crown (part I). This drove the expansión of urban indebtedness and the introduction of new indirect taxes in most Castilian cities, which exerted an important, although far from overwhelming, influence on the rise of price levels and the simultaneous fall of real wages in Madrid and, presumibly, other Castilian cities (part II). In return for these “servicios”, the Crown transferred Madrid most of the “servicios de millones” levied in the capital and this reduced the capacity of the Royal Treasury to increase its revenues in the long term (part III).
ese período con el desarrollo del absolutismo, pero también con la expansión de las ideas del iusracionalismo y de la ilustración que acabarán cristalizando en las revolu-ciones liberales. en este estudio se analiza uno de los grandes municipios del territorio afectado por los decretos de Nueva planta, alzira. Su complicado proceso de adaptación a las leyes castella-nas; sus nuevos cargos y la aplicación de las reformas de carlos III. estructura que se mantu-vo hasta la ocupación francesa de la ciudad en 1811. Palabras clave: ayuntamiento borbónico. decretos de Nueva planta. reformas Ilustradas. Guerra de la Independencia. alzira. Abstract: With the war of Spanish Succession the crown of aragon as a political and legal entity disappears. a series of royal decrees modified a Spanish monarchy making it unified and centralized monarchy, governed under the same law. This period coincides with the development of absolutism, but also with the expansion of iusracionalismo and enlightenment ideas that eventually crystallized in the liberal revolutions. This study examines one of the largest municipalities in the territory affected by the decrees of New plant, alzira. The complicated process of adaptation to the castilian laws; the new roles and implementing the reforms of charles III. Structure remained until the French occupation of the city in 1811. Key words: borbon municipality. decrees of New plant. enlightenment reforms. War of Independence. alzira. TraS la Guerra de Sucesión y los decretos de Nueva planta comenzó para los territorios de la corona de aragón, y en particular para el reino de Va-lencia, una nueva etapa de centralización y uniformidad legislativa y admi-nistrativa. También en cierta medida, social y cultural. en virtud de la sobe-ranía absoluta del monarca, convertido ahora en conquistador a causa del conflicto bélico, se operaba la transformación de la monarquía española. de una monarquía que había asumido fueros y libertades, derechos propios de los reinos que la componían, se pasaba a una nueva relación con el titu-193 Estudis. Revista de Historia Moderna, 39, 2013, pp. 193-213. I.S.S.N. 0210-9093
We construct the first time-series for Portugal’s per capita GDP for 1527-1850, drawing on a new database. Starting in the early 1630s there was a highly persistent upward trend which accelerated after 1710 and peaked 40 years later. At that point, per capita income was high by European standards, though behind the most advanced Western European economies. But as the second half of the eighteenth century unfolded, a phase of economic decline was initiated. This continued into the nineteenth century, and by 1850 per capita incomes were not different from what they had been in the early 1530s.
In this research, Markov switching autoregressive (MS-AR) models and six different time series modeling approaches are considered. These models are compared according to their performance for capturing the Iranian exchange rate series. The series has jumped dramatically in early 2002, which coincides with the exchange rate regimes’ change of policy. Our criteria are based on the AIC and BIC values. The results indicate that the MS-AR models can be considered as useful models, with the best fit, to evaluate the behaviors of Iran’s exchange rate.
Este trabalho tem como objectivo caracterizar a Contabilidade praticada em Portugal ao longo de um período temporal com cerca de 700 anos, que vai desde o século XII a meados do século XVIII, facultando uma sumária, mas assertiva, noção de como evoluiu o pensamento contabilístico português nos primórdios da nacionalidade. Para tal, iremos nos recorrer de diversos exemplos de contabilidades escrituradas por todo o território português, no período referenciado. Para ser possível a concretização deste objectivo, este estudo elege como metodologia uma abordagem qualitativa e como método de investigação o bibliográfico. As principais conclusões a reter deste trabalho passam pelo facto de a Contabilidade por partidas simples ter sido a única a ser utilizada até ao século XV, enquanto que a partir desse século já se utilizava, a espaços, o método das partidas dobradas, mas ainda longe da qualidade e quantidade que seria expectável, se tivermos em conta o advento dos “Descobrimentos”, e correspondente desenvolvimento comercial do país, e do que se passava no resto da Europa, à época, a um nível contabilístico. De acrescentar que em anos recentes a análise deste período temporal tem sido negligenciada, em detrimento da realizada aos séculos seguintes, o que torna ainda mais pertinente este estudo.
The debate over the institutions that link economic growth to public finance tends to disregard the need for savings to finance growing public debt. In seventeenth-century Holland the structure, size, and issuing rates of the debt were determined by investors' preferences, wealth accumulation, and changing private investment opportunities. The growth of savings enabled the creation of a huge debt largely with short-term bills. Issuing rates dropped because savings outstripped private investment alternatives. In Holland, and probably elsewhere as well, credible commitment and efficient fiscal institutions were necessary, but not sufficient to create liquid secondary markets and low costs of capital.
Trade is a critical component of economic growth in newly settled societies. This paper tests the impact of ship traffic on the Cape economy using a time series smoothing technique borrowed from the business cycle literature and employing an econometric procedure to test for long-run relationships. The results suggest a strong systematic co-movement between wheat production and ship traffic, with less evidence for wine production and stock herding activities. While ship traffic created demand for wheat exports, the size of the co-movement provides evidence that ship traffic also stimulated local demand through secondary and tertiary sector activities, supporting the hypothesis that ship traffic acted as a catalyst for growth in the Cape economy.
This paper demonstrates that negative serial correlation in long-horizon stock returns is consistent with an equilibrium model of asset pricing. When investors display only a moderate desire to smooth their consumption, commonly used measures of mean reversion in stock prices calculated from historical returns data nearly always lie within a 60 percent confidence interval of the median of the Monte Carlo distributions implied by the authors equilibrium model. From this evidence, the authors conclude that the degree of serial correlation in the data could plausibly have been generated by their model. Copyright 1990 by American Economic Association.
This paper explores the role played by municipal traders in the development of fin de siècle London's tramway system. Influenced by progressive politics, the Highways Committee of the London County Council developed a trading organisation that also had a social mission of improving living and working conditions for tramway users and employees alike. The Committee also enacted major urban change through the Kingsway Tunnel Project, which was an exemplar of their commitment to combining financial and social profit. We conclude that the committee's mission reflected a deep commitment to social and economic improvement far beyond the transport sphere alone.
The relations between central and local power has been feeding historiographical discussion on topics such as the coexistence between a model imposed by the “official administration” and the “spontaneous administration” of the municipalities (Hespanha 1994). This duality triggers decisions and mechanisms of rupture and/or commitment by different levels of power. Under this theoretical approach, this paper intends to compare the financial administration of several Portuguese municipalities during the reigns of João V and José I, in terms of their financial organization and accounting records. In a context of political and administrative reforms and growing crown intervention, there are different degrees of effectiveness of royal interference in the municipalities. This interference is reinforced in the reign of José I, mainly in the municipality of Lisbon, unlike other municipalities in which it proves less effective.
This paper provides a time-series analysis of recent annual estimates of real GDP and industrial output covering 1270-1913. We show that growth can be regarded as a segmented trend-stationary process. On this basis, we find that trend growth of real GDP per person was zero prior to the 1660s but then experienced two significant accelerations, pre- and post-industrial revolution. We also find that the hallmark of the industrial revolution is a substantial increase in the trend rate of growth of industrial output rather than being an episode of difference stationary growth.
This article provides a comparison of long-term changes in inequality in two key areas of preindustrial Europe: Central-Northern Italy and the Low Countries. Based on new archival material, we reconstruct regional estimates of economic inequality during 1500-1800 and use them to assess the role of economic growth, social-demographic variables, proletarianization, and institutions. We argue that different explanations should be invoked to understand the early modern growth of inequality throughout Europe since several factors conspired to make for a society in which it was much easier for inequality to rise than to fall. Although long-term trends in economic inequality were apparently similar across the continent, divergence occurred in terms of inequality extraction ratios.
Recently, Perron has carried out tests of the unit-root hypothesis against the alternative hypothesis of trend stationarity with a break in the trend occurring at the Great Crash of 1929 or at the 1973 oil-price shock. His analysis covers the Nelson-Plosser macroeconomic data series as well as a postwar quarterly real gross national product (GNP) series. His tests reject the unit-root null hypothesis for most of the series. This article takes issue with the assumption used by Perron that the Great Crash and the oil-price shock can be treated as exogenous events. A variation of Perron's test is considered in which the breakpoint is estimated rather than fixed. We argue that this test is more appropriate than Perron's because it circumvents the problem of data-mining. The asymptotic distribution of the estimated breakpoint test statistic is determined. The data series considered by Perron are reanalyzed using this test statistic. The empirical results make use of the asymptotics developed for the test statistic as well as extensive finite-sample corrections obtained by simulation. The effect on the empirical results of fat-tailed and temporally dependent innovations is investigated. In brief, by treating the breakpoint as endogenous, we find that there is less evidence against the unit-root hypothesis than Perron finds for many of the data series but stronger evidence against it for several of the series, including the Nelson-Plosser industrial-production, nominal-GNP, and real-GNP series.
Newly assembled macroeconomic statistics for early modern Portugal reveal one of Europe's most vigorous colonial traders but
one of its least successful growth records. Was the empire a blessing or a drag to the economy? Using an estimated dynamic
model, we conclude that intercontinental trade had a substantial and increasingly positive impact on economic growth. In the
heyday of colonial expansion, eliminating the economic links to empire would have reduced Portugal's per capita income by
at least a fifth. While the empire helped the domestic economy, it was not sufficient to annul the tendency of the latter
toward decline in relation to Europe's advanced core, which began to set in from the seventeenth century onward, but only
became definite after 1800. We conclude that the explanation for Portugal's long-term backwardness must be sought primarily
in domestic conditions.
Indebted cities were a widespread phenomenon during the Ancien Régime. However, some found ways to innovate the management of their municipal debt, whilst others fell prey to over-indebtedness or default. In this article we have left the success stories aside and focused on the latter. Using early modern Antwerp as a case study, we have disentangled the underlying mechanisms that ultimately lead to over-indebtedness and (in some cases) default. Whilst the economic climate and the relationship between city and state have been rightly identified as major factors in the previous literature, our contribution brings another element to the table, namely, the inflexibility of long-established rent arrangements and the entanglement between the ruling elite and the rentiers. We show that there was a strong overlap between both groups, which had a huge impact on the financial policy of cities during the early modern period.
This paper is an account of the institutional mechanisms that have influenced business history in the early to late Middle Ages in the city of Coventry. The paper discusses socio-cultural, political, religious, and historical influences on the city's major trades during the era and incorporates analysis of governance structures in the form of Coventry's famous guilds which were instrumental in shaping the trajectory of one of England's foremost cities during the chronicled era. Through this examination we seek to complement and contribute to business history literature that is increasingly intrigued by business and economic activities pre-dating the industrial and manufacturing era, thus enriching discussion about business and institutional dynamics in the pre-modern era.
El estudio de la gestión de las finanzas Municipales permite profundizar en el conocimiento de la funcionalidad y eficiencia de las instituciones en la Edad Moderna. En este trabajo se analiza el caso del patrimonio municipal de Madrid, una parte fundamental de las haciendas locales. Su gestión se estructura en tres niveles: el nivel político, en el que la toma de decisiones y control sobre los propios corresponde al ayuntamiento (corregidor y regidores); la administración y tesorería, que recaía en el mayordomo y, por último, el control contable por parte de diversas contadurías. Este entramado institucional se estudia en una perspectiva de largo plazo, analizando los cambios e innovaciones experimentadas, especialmente con las reformas en el régimen municipal llevado a cabo en el s. XVIII.
This paper re-examines the causal relationship between energy use and Gross Domestic Product (GDP) in the United States for the period 1960–2005. To that end, we use Markov-switching vector autoregressive (MS-VAR) models, rather than vector autoregressive (VAR) models, which allows for regime shifts. These models are capable of detecting changes in the relationship between variables; in addition, the coefficients of the model are time dependent and they depend on the states of the variables. Therefore, in contrast to VAR and vector error correction models (VECM), which assume a stable relationship, the relationship between the variables could be different in the separate regimes.Results from the estimation of MS models show changes in the pattern of causality relationship between GDP and energy use. That is, we found evidence of bidirectional Granger causality (GC) between the variables in the first regime, while there is no GC between the variables in the second regime. The first regime consists of 1971–1975, 1977–1982, 1989–1995, and from 2001 to the end of the sample. This regime includes the energy crises in 1970s, the recessions in the early 1980s, 1990s, and the recession in 2001.
This paper traces the history of prices and wages in European cities from the fourteenth century to the First World War. It is shown that the divergence in real incomes observed in the mid-nineteenth century was produced between 1500 and 1750 as incomes fell in most European cities but were maintained (not increased) in the economic leaders.
We examine a variety of models in which the variance of a portfolio's excess return depends on a state variable generated by a first-order Markov process. A model in which the state is known to economic agents is estimated. It suggests that the mean excess return moves inversely with the level of risk. We then estimate a model in which agents are uncertain of the state. The estimates indicate that agents are consistently surprised by high-variance periods, so there is a negative correlation between movements in volatility and in excess returns.
This paper develops a generalized regime-switching (GRS) model of the short-term interest rate. The model allows the short rate to exhibit both mean reversion and conditional heteroskedasticity and nests the popular generalized autoregressive conditional heteroskedasticity (GARCH) and square root process specifications. The conditional variance process accommodates volatility clustering and dependence on the level of the interest rate. A first-order Markov process with state-dependent transition probabilities governs the switching between regimes. The GRS model is compared with various existing models of the short rate in terms of (1) the statistical fit of short-term interest rate data and (2) out-of-sample forecasting performance.
This paper uses Markov switching models to capture volatility dynamics in exchange rates and to evaluate their forecasting ability. We identify that increased volatilities in four euro-based exchange rates are due to underlying structural changes. Also, we find that currencies are closely related to each other, especially in high-volatility periods, where cross-correlations increase significantly. Using Markov switching Monte Carlo approach we provide evidence in favour of Markov switching models, rejecting random walk hypothesis. Testing in-sample and out-of-sample Markov trading rules based on Dueker and Neely ( Journal of Banking and Finance , 2007) we find that using econometric methodology is able to forecast accurately exchange rate movements. When applied to the Euro|US dollar and the euro|British pound daily returns data, the model provides exceptional out-of-sample returns. However, when applied to the euro|Brazilian real and the euro|Mexican peso, the model loses power. Higher volatility exercised in the Latin American currencies seems to be a critical factor for this failure. Copyright © 2009 John Wiley & Sons, Ltd.
La política fiscal española sufrió una transformación fundamental del Antiguo al Nuevo Régimen. Esta transformación tenía motivaciones tanto internas -debidas al déficit crónico que venía sufriendo la Hacienda Pública y que se vieron agravadas a final del siglo XIX- como externas -por la influencia de una ideología liberal que se extendía por Europa en aquella época-. Todo ello dio lugar a una pérdida de autonomía fiscal por parte de los ayuntamientos, en cuyas finanzas el Estado vio la solución a sus problemas financieros. La reforma definitiva se produjo en 1845, reforma que sentó las bases de un moderno sistema de tributación que pondría la fiscalidad de España a la altura del resto de Europa.
An extension of Hamilton's Markov switching techniques (Hamilton, J. B., 1989, A new approach to the economic analysis of nonstationary time series and the business cycle, Econometrica, 57, 357-84) is used to describe and analyse stock market returns. Using new tests, very strong evidence is found for switching behaviour. A major innovation is to use a multivariate specification that allows examination of whether the price/dividend ratio has marginal predictive power for stock market returns after accounting for state-dependent switching. We find strong evidence of predictability. The response of returns to the past price/dividend ratio is strongly asymmetric - about four times larger in the low-return state than in the high-return state. A second innovationis to allow the probability of transitions from one regime to another to depend on economic variables; again there is an asymmetric response to the past price/dividend ratio.
We evaluate the performance of several specification tests for Markov regime-switching time-series models. We consider the Lagrange multiplier (LM) and dynamic specification tests of Hamilton (1996) and Ljung-Box tests based on both the generalized residual and a standard-normal residual constructed using the Rosenblatt transformation. The size and power of the tests are studied using Monte Carlo experiments. We find that the LM tests have the best size and power properties. The Ljung-Box tests exhibit slight size distortions, though tests based on the Rosenblatt transformation perform better than the generalized residual-based tests. The tests exhibit impressive power to detect both autocorrelation and autoregressive conditional heteroscedasticity (ARCH). The tests are illustrated with a Markov-switching generalized ARCH (GARCH) model fitted to the US dollar-British pound exchange rate, with the finding that both autocorrelation and GARCH effects are needed to adequately fit the data. Copyright 2008 The Author. Journal compilation 2008 Blackwell Publishing Ltd
This paper is of interest both for its methodological contribution of new tools for analyzing rational-expectations models and for its substantive conclusions concerning the term structure of interest rates during the monetary experiment of October 1979.The paper studies systems subject to changes in regime, interpreted here as occasional, discrete shifts in the parameters governing the time series behavior of exogenous economic variables. The specification is shown to be quite tractable both theoretically and empirically. The technique is used to analyze yields on three-month Treasury bills and ten-year Treasury bonds during 1962 to 1987. A constant-parameter linear model for short-term rates is shown to be inconsistent both with the univariate time series properties of short rates and with the observed bivariate relation between long and short rates under the expectations hypothesis of the term structure. AN alternative nonlinear model that admits the possibility of changes in regime affords a much better description of the univariate process for short rates. Moreover, the cross-equation restrictions implied by the expectations hypothesis of the term structure are consistent with the nonlinear specification. Indeed, the residuals of the restricted relation have a standard error of only 0.8 basis points. This is a third less than that of a completely unrestricted linear regression of long rates on short rates, and compares with an unconditional standard deviation of long rates of 142 basis points.I conclude that once the recognition by bond traders of changes in regime is taken into account, the expectations hypothesis of the term structure of interest rates holds up fairly well for these data.