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Testing for Parameter Stability in Dynamic Models across Frequencies

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  • Candelon,Bertrand
  • Cubadda,Gianluca

    (METEOR)

Abstract

This paper contributes to the econometric literature on structural breaks by proposing a test for parameter stability in VAR models at a particular frequency 'omega', where 'omega is an element of [0, pi]'.When a dynamic model is affected by a structural break, the new tests allow for detecting which frequencies of the data are responsible for parameter instability. If the model is locally stable at the frequencies of interest, the whole sample size can be then exploited despite the presence of a break. Two empirical examples illustrate that local instability can concern only the lower frequencies (decrease in the postwar U.S. productivity) or higher frequencies(change in the U.S. monetary policy in the early 80's).

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Bibliographic Info

Paper provided by Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization in its series Research Memoranda with number 022.

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Date of creation: 2005
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Handle: RePEc:dgr:umamet:2005022

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Web page: http://www.maastrichtuniversity.nl/web/UMPublications.htm

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Keywords: econometrics;

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  16. Breitung, Jörg & Candelon, Bertrand, 2006. "Testing for short- and long-run causality: a frequency-domain approach," Open Access publications from Maastricht University urn:nbn:nl:ui:27-19697, Maastricht University.
  17. Centoni, Marco & Cubadda, Gianluca, 2003. "Measuring the business cycle effects of permanent and transitory shocks in cointegrated time series," Economics Letters, Elsevier, vol. 80(1), pages 45-51, July.
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Cited by:
  1. Atella, Vincenzo & Centoni, Marco & Cubadda, Gianluca, 2008. "Technology shocks, structural breaks and the effects on the business cycle," Economics Letters, Elsevier, vol. 100(3), pages 392-395, September.

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