Advanced Search
MyIDEAS: Login

A Multivariate Long-Memory Model with Structural Breaks

Contents:

Author Info

  • Guglielmo Maria Caporale
  • Luis A. Gil-Alana

Abstract

This paper introduces a multivariate long-memory model with structural breaks. In the proposed framework, time series exhibit possibly fractional orders of integration which are allowed to be different in each subsample. The break date is endogenously determined using a procedure which minimises the residual sum of squares (RSS). Monte Carlo experiments show that this method for detecting breaks performs well in large samples. As an illustration, we estimate a trivariate VAR including prices, employment and GDP in both the US and Mexico. For the subsample preceding the break our findings are similar to those of earlier studies based on a standard VAR approach in both countries, in the sense that the variables exhibit integer degrees of integration. On the contrary, the series are found to be fractionally integrated after the break, with the fractional differencing parameters being higher than 1 in the case of Mexico.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2007/wp-cesifo-2007-03/cesifo1_wp1950.pdf
Download Restriction: no

Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1950.

as in new window
Length:
Date of creation: 2007
Date of revision:
Handle: RePEc:ces:ceswps:_1950

Contact details of provider:
Postal: Poschingerstrasse 5, 81679 Munich
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Email:
Web page: http://www.cesifo.de
More information through EDIRC

Related research

Keywords: multivariate models; fractional integration; structural breaks;

Find related papers by JEL classification:

References

References listed on IDEAS
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.:
as in new window
  1. William R. Parke, 1999. "What Is Fractional Integration?," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 632-638, November.
  2. Marcelle Chauvet & Simon Potter, 2001. "Recent changes in the U.S. business cycle," Staff Reports 126, Federal Reserve Bank of New York.
  3. Sowell, Fallaw, 1992. "Maximum likelihood estimation of stationary univariate fractionally integrated time series models," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 165-188.
  4. Morten Oerregaard Nielsen, . "Efficient Inference in Multivariate Fractionally Integrated Time Series Models," Economics Working Papers 2002-6, School of Economics and Management, University of Aarhus.
  5. Canova, Fabio, 2002. "G-7 Inflation Forecasts," CEPR Discussion Papers 3283, C.E.P.R. Discussion Papers.
  6. Granger, C. W. J., 1981. "Some properties of time series data and their use in econometric model specification," Journal of Econometrics, Elsevier, vol. 16(1), pages 121-130, May.
  7. Diebold, Francis X. & Inoue, Atsushi, 2001. "Long memory and regime switching," Journal of Econometrics, Elsevier, vol. 105(1), pages 131-159, November.
  8. Peter C.B. Phillips & Pierre Perron, 1986. "Testing for a Unit Root in Time Series Regression," Cowles Foundation Discussion Papers 795R, Cowles Foundation for Research in Economics, Yale University, revised Sep 1987.
  9. Guglielmo Maria Caporale & Luis A. Gil-Alana, 2004. "Non-Linearities And Fractional Integration In The Us Unemployment Rate," Economics and Finance Discussion Papers 04-17, Economics and Finance Section, School of Social Sciences, Brunel University.
  10. Sowell, Fallaw, 1992. "Modeling long-run behavior with the fractional ARIMA model," Journal of Monetary Economics, Elsevier, vol. 29(2), pages 277-302, April.
  11. Linda Debenedictis, 1997. "A vector autoregressive model of the British Columbia regional economy," Applied Economics, Taylor & Francis Journals, vol. 29(7), pages 877-888.
  12. Norman Cameron & Derek Hum & Wayne Simpson, 1996. "Stylized Facts and Stylized Illusions: Inflation and Productivity Revisited," Canadian Journal of Economics, Canadian Economics Association, vol. 29(1), pages 152-62, February.
  13. Iris Claus, 1999. "Estimating potential output for New Zealand: a structural VAR approach," Reserve Bank of New Zealand Discussion Paper Series DP2000/03, Reserve Bank of New Zealand.
  14. Gil-Alana, L. A. & Robinson, P. M., 1997. "Testing of unit root and other nonstationary hypotheses in macroeconomic time series," Journal of Econometrics, Elsevier, vol. 80(2), pages 241-268, October.
  15. Francis X. Diebold & Glenn D. Rudebusch, 1988. "Long memory and persistence in aggregate output," Finance and Economics Discussion Series 7, Board of Governors of the Federal Reserve System (U.S.).
  16. Thórarinn G. Pétursson & Torsten Sløk, 2001. "Wage formation and employment in a cointegrated VAR model," Econometrics Journal, Royal Economic Society, vol. 4(2), pages 2.
  17. Chang-Jin Kim & Charles Nelson & Jeremy Piger, 2001. "The less volatile U.S. economy: a Bayesian investigation of timing, breadth, and potential explanations," International Finance Discussion Papers 707, Board of Governors of the Federal Reserve System (U.S.).
  18. Granger, C. W. J., 1980. "Long memory relationships and the aggregation of dynamic models," Journal of Econometrics, Elsevier, vol. 14(2), pages 227-238, October.
  19. Baillie, Richard T., 1996. "Long memory processes and fractional integration in econometrics," Journal of Econometrics, Elsevier, vol. 73(1), pages 5-59, July.
  20. Gil-Alana, L. A., 2003. "A fractional multivariate long memory model for the US and the Canadian real output," Economics Letters, Elsevier, vol. 81(3), pages 355-359, December.
  21. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. J. Atsu Amegashie & Bazoumana Ouattara & Eric Strobl, 2007. "Moral Hazard and the Composition of Transfers: Theory with an Application to Foreign Aid," CESifo Working Paper Series 1996, CESifo Group Munich.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_1950. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.