Testing for multiple bubbles: historical episodes on the sustainability of public debt in Spain, 1850-2020

Purpose – This paper aims to analyze the dynamics of the Spanish public debt–gross domestic product ratio during the period 1850–2020. Design/methodology/approach – This study uses a recent procedure to test for recurrent explosive behavior (Phillips et al., 2011; Phillips et al., 2015a, 2015b) to identify episodes of explosive public debt dynamics and also the episodes of fiscal adjustments over this long period. Findings – The identified episodes of explosive behavior of public debt coincided with fiscal stress events, whereas fiscal adjustments and changes in economic policies stabilized public finances after periods of explosive dynamics of public debt. Originality/value – The longer than usual span of the data should allow the authors to obtain some more robust results than in most of previous analyses of long-run sustainability.