A Time Series Model of Multiple Structural changes in Level, Trend and Variance

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A Time Series Model of Multiple Structural changes in Level, Trend and Variance

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Jiahui Wang (MathSoft)
Eric Zivot (University of Washington)

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Eric Zivot

Abstract

We consider a deterministically trending dynamic time series model in which multiple changes in level, trend and error variance are modeled explicitly and the number but not the timing of the changes are known. Estimation of the model is made possible by the use of the Gibbs sampler. The determination of the number of structural breaks and the form of structural change is considered as a problem of model selection and we compare the use of marginal likelihoods, posterior odds ratios and Schwarz' BIC model selection criterion to select the most appropriate model from the data. We evaluate the efficacy of the Bayesian approach using a small Monte Carlo experiment. As empirical examples, we investigate structural changes in the U.S. ex-post real interest rate and in a long time series of U.S. GDP.

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Paper provided by EconWPA in its series Econometrics with number 9903002.

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Length: 13 pages
Date of creation: 24 Mar 1999
Date of revision: 31 Mar 1999
Handle: RePEc:wpa:wuwpem:9903002

Note: Type of Document - Adobe Acrobat; prepared on PC using TeX; to print on Postscript; pages: 13 ; figures: included
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Find related papers by JEL classification:
C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Bayesian Analysis
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions

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.:

Jushan Bai, 1997. "Estimation Of A Change Point In Multiple Regression Models," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 551-563, November. [Downloadable!] (restricted)
Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-56, July. [Downloadable!] (restricted)
Other versions:
- Donald W.K. Andrews, 1990. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Cowles Foundation Discussion Papers 943, Cowles Foundation, Yale University. [Downloadable!]

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