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A Methodology For Detecting Breaks In The Mean And Covariance Structure Of Time Series

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  • Mohamed Boutahar

    ()
    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)

  • Jamel Jouini

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579, FSEGN - Faculté des Sciences Economiques et de Gestion - université 7 Novembre de Carthage)

Abstract

Some structural break techniques defined in the time and frequency domains are presented to explore, at the same time, the empirical evidence of the mean and covariance instability by uncovering regime-shifts in some inflation series. To that effect, we pursue a methodology that combines two approaches; the first is defined in the time domain and is designed to detect mean-shifts, and the second is defined in the frequency domain and is adopted to study the instability problem of the covariance function of the series. The proposed methodology has a double interest since, besides the detection of regime-shifts occasioned in the covariance structure of the series, it allows taking into account the presence of mean-shifts in this series. Note that unlike the works existing in the literature which often adopt a single technique to study the break identification problem, our methodology combines two approaches, parametric and nonparametric, to examine this problem.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number halshs-00354249.

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Date of creation: 01 Sep 2007
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Handle: RePEc:hal:wpaper:halshs-00354249

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Related research

Keywords: Structural change; mean and variance shifts; parametric and nonparametric approaches.;

References

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  1. Jushan Bai, 1995. "Estimating Multiple Breaks One at a Time," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 95-18, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 979, Cowles Foundation for Research in Economics, Yale University.
  3. Pagan, Adrian R. & Schwert, G. William, 1990. "Testing for covariance stationarity in stock market data," Economics Letters, Elsevier, Elsevier, vol. 33(2), pages 165-170, June.
  4. Jouini, Jamel & Boutahar, Mohamed, 2005. "Evidence on structural changes in U.S. time series," Economic Modelling, Elsevier, Elsevier, vol. 22(3), pages 391-422, May.
  5. Mohamed Safouane Ben Aissa & Mohamed Boutahar & Jamel Jouini, 2004. "Bai and Perron's and spectral density methods for structural change detection in the US inflation process," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 11(2), pages 109-115.
  6. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, Elsevier, vol. 31(3), pages 307-327, April.
  7. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
  8. Bilke, L., 2005. "Break in the Mean and Persistence of Inflation: a Sectoral Analysis of French CPI," Working papers, Banque de France 122, Banque de France.
  9. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, Elsevier, vol. 10(2), pages 139-162.
  10. Andrew Levin & Jeremy Piger, 2003. "Is Inflation Persistence Intrinsic in Industrial Economies?," Computing in Economics and Finance 2003, Society for Computational Economics 298, Society for Computational Economics.
  11. Jeff Fuhrer & George Moore, 1993. "Inflation persistence," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 93-17, Board of Governors of the Federal Reserve System (U.S.).
  12. Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche, Universite de Montreal, Departement de sciences economiques 9552, Universite de Montreal, Departement de sciences economiques.
  13. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, Econometric Society, vol. 50(4), pages 987-1007, July.
  14. Ahamada, Ibrahim, 2002. "Tests for covariance stationarity and white noise, with an application to Euro/US dollar exchange rate: An approach based on the evolutionary spectral density," Economics Letters, Elsevier, Elsevier, vol. 77(2), pages 177-186, October.
  15. Thomas Mikosch & Catalin Starica, 2004. "Non-stationarities in financial time series, the long range dependence and the IGARCH effects," Econometrics, EconWPA 0412005, EconWPA.
  16. Jamel JOUINI & Mohamed BOUTAHAR, 2007. "wrong estimation of the true number of shifts in structural break models: Theoretical and numerical evidence," Economics Bulletin, AccessEcon, vol. 3(3), pages 1-10.
  17. Loretan, Mico & Phillips, Peter C. B., 1994. "Testing the covariance stationarity of heavy-tailed time series: An overview of the theory with applications to several financial datasets," Journal of Empirical Finance, Elsevier, Elsevier, vol. 1(2), pages 211-248, January.
  18. repec:ebl:ecbull:v:3:y:2007:i:3:p:1-10 is not listed on IDEAS
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