Diagnosis and Prediction of IIGPS’ Countries Bubble Crashes During BREXIT
Mathematics, 9, 9, 1003, https://doi.org/10.3390/math9091003
16 Pages Posted: 4 May 2021
Date Written: April 29, 2021
We herein employ an alternative approach to model the financial bubbles prior to crashes and fit a log-periodic power law (LPPL) to IIGPS countries (Italy, Ireland, Greece, Portugal, and Spain) during Brexit. These countries represent the five financially troubled economies of the Eurozone that have suffered the most during the Brexit referendum. It was found that all 77 crashes across the five IIGPS nations from 19 January 2015 until 17 February 2020 strictly fol-lowed a log-periodic power law or other LPPL signature. They all had a speculative bubble phase (following the power law growth) that was then followed by a sudden crash immedi-ately after reaching a critical point. Furthermore, their pattern coefficients were similar as well. This study would surely assist policymakers around the Eurozone to predict future crashes with the help of these parameters.
Keywords: financial bubbles; market crashes; log-periodic power law; IIGPS’ countrie
JEL Classification: G10;G15
Suggested Citation: Suggested Citation