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Analysis Of Vector Autoregressions In The Presence Of Shifts In Mean

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Author Info
Serena Ng
Timothy Vogelsang

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Abstract

This paper considers the implications of mean shifts in a multivariate setting. It is shown that under the additive outlier type mean shift specification, the intercept in each equation of the vector autoregression (VAR) will be subject to multiple shifts when the break dates of the mean shifts to the univariate series do not coincide. Conversely, under the innovative outlier type mean shift specification, both the univariate and the multivariate time series are subject to multiple shifts when mean shifts to the innovation processes occur at different dates. We consider two procedures, the first removes the shifts series by series before forming the VAR, and the second removes intercept shifts in the VAR directly. The pros and cons of both methods are discussed.

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Article provided by Taylor and Francis Journals in its journal Econometric Reviews.

Volume (Year): 21 (2002)
Issue (Month): 3 ()
Pages: 353-381
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Handle: RePEc:taf:emetrv:v:21:y:2002:i:3:p:353-381

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Related research
Keywords: Trend break Structural change Causality tests Forecasting

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References listed on IDEAS
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  15. Chu, Chia-Shang James & White, Halbert, 1992. "A Direct Test for Changing Trend," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 289-99, July.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Robin L. Lumsdaine & Serena Ng, 1998. "Testing for ARCH in the Presence of a Possibly Misspecified Conditional Mean," Boston College Working Papers in Economics 370, Boston College Department of Economics. [Downloadable!]
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  2. Alfredo M. Pereira & Martin B. Schmidt, 2007. "Structural Breaks in Public Infrastructure Investment in the U.S," Working Papers 55, Department of Economics, College of William and Mary. [Downloadable!]
  3. Thierno A. Baldé & Gabriel Rodríguez, 2005. "Finite sample effects of additive outliers on the Granger-causality test with an application to money growth and inflation in Peru," Applied Economics Letters, Taylor and Francis Journals, vol. 12(13), pages 841-844, October. [Downloadable!] (restricted)
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