IDEAS home Printed from https://ideas.repec.org/a/oup/restud/v74y2007i3p763-789.html
   My bibliography  Save this article

Estimation and Forecasting in Models with Multiple Breaks

Author

Listed:
  • Gary Koop
  • Simon M. Potter

Abstract

This paper develops a new approach to change-point modelling that allows the number of change-points in the observed sample to be unknown. The model we develop assumes that regime durations have a Poisson distribution. It approximately nests the two most common approaches: the time-varying parameter (TVP) model with a change-point every period and the change-point model with a small number of regimes. We focus considerable attention on the construction of reasonable hierarchical priors both for regime durations and for the parameters that characterize each regime. A Markov chain Monte Carlo posterior sampler is constructed to estimate a version of our model, which allows for change in conditional means and variances. We show how real-time forecasting can be done in an efficient manner using sequential importance sampling. Our techniques are found to work well in an empirical exercise involving U.S. GDP growth and inflation. Empirical results suggest that the number of change-points is larger than previously estimated in these series and the implied model is similar to a TVP (with stochastic volatility) model. Copyright 2007, Wiley-Blackwell.

Suggested Citation

  • Gary Koop & Simon M. Potter, 2007. "Estimation and Forecasting in Models with Multiple Breaks," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 763-789.
  • Handle: RePEc:oup:restud:v:74:y:2007:i:3:p:763-789
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/j.1467-937X.2007.00436.x
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Lists

    This item is featured on the following reading lists or Wikipedia pages:
    1. Estimation and Forecasting in Models with Multiple Breaks (REStud 2007) in ReplicationWiki

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:restud:v:74:y:2007:i:3:p:763-789. 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: (Oxford University Press) or (Christopher F. Baum). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.