Bayesian Analysis of Dynamic Multivariate Models with Multiple Structural Breaks
AbstractThis paper considers a vector autoregressive model or a vector error correction model with multiple structural breaks in any subset of parameters, using a Bayesian approach with Markov chain Monte Carlo simulation technique. The number of structural breaks is determined as a sort of model selection by the posterior odds. For a cointegrated model, cointegrating rank is also allowed to change with breaks. Bayesian approach by Strachan (Journal of Business and Economic Statistics 21 (2003) 185) and Strachan and Inder (Journal of Econometrics 123 (2004) 307) are applied to estimate the cointegrating vectors. As empirical examples, we investigate structural changes in the predictive power of the yield curve and the US term structure of interest rates. We find strong evidence of three structural changes in both applications.
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Bibliographic InfoPaper provided by Graduate School of Economics, Hitotsubashi University in its series Discussion Papers with number 2006-14.
Length: 58 p.
Date of creation: Nov 2006
Date of revision:
Bayesian inference; Structural break; Cointegration; Bayes factor;
Find related papers by JEL classification:
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
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- Markus Jochmann & Gary Koop, 2011.
1125, University of Strathclyde Business School, Department of Economics.
- Markus Jochmann & Gary Koop, 2011. "Regime-Switching Cointegration," Working Paper Series 40_11, The Rimini Centre for Economic Analysis.
- Jochmann, Markus & Koop, Gary, 2011. "Regime-Switching Cointegration," SIRE Discussion Papers 2011-60, Scottish Institute for Research in Economics (SIRE).
- Jochmann, Markus & Koop, Gary, 2011. "Regime-Switching Cointegration," SIRE Discussion Papers 2011-36, Scottish Institute for Research in Economics (SIRE).
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