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Analysis Of Vector Autoregressions In The Presence Of Shifts In Mean


  • Serena Ng
  • Timothy Vogelsang


This paper considers the implications of mean shifts in a multivariate setting. It is shown that under the additive outlier type mean shift specification, the intercept in each equation of the vector autoregression (VAR) will be subject to multiple shifts when the break dates of the mean shifts to the univariate series do not coincide. Conversely, under the innovative outlier type mean shift specification, both the univariate and the multivariate time series are subject to multiple shifts when mean shifts to the innovation processes occur at different dates. We consider two procedures, the first removes the shifts series by series before forming the VAR, and the second removes intercept shifts in the VAR directly. The pros and cons of both methods are discussed.

Suggested Citation

  • Serena Ng & Timothy Vogelsang, 2002. "Analysis Of Vector Autoregressions In The Presence Of Shifts In Mean," Econometric Reviews, Taylor & Francis Journals, vol. 21(3), pages 353-381.
  • Handle: RePEc:taf:emetrv:v:21:y:2002:i:3:p:353-381 DOI: 10.1081/ETC-120015788

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    References listed on IDEAS

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    Cited by:

    1. Lumsdaine, Robin L. & Ng, Serena, 1999. "Testing for ARCH in the presence of a possibly misspecified conditional mean," Journal of Econometrics, Elsevier, vol. 93(2), pages 257-279, December.
    2. Marcos Sanso-Navarro, 2011. "Broken trend stationarity of hours worked," Post-Print hal-00712742, HAL.
    3. PKG HARISCHANDRA & George CHOULIARAKIS, "undated". "Do Exchange Rate Regimes Matter for Inflation Persistence? Theory and Evidence from the History of UK and US Inflation," EcoMod2008 23800100, EcoMod.
    4. Thierno Balde & Gabriel Rodriguez, 2005. "Finite sample effects of additive outliers on the Granger-causality test with an application to money growth and inflation in Peru," Applied Economics Letters, Taylor & Francis Journals, vol. 12(13), pages 841-844.
    5. repec:kap:jfamec:v:38:y:2017:i:2:d:10.1007_s10834-016-9514-3 is not listed on IDEAS
    6. Nazlioglu, Saban & Gormus, N. Alper & Soytas, Uğur, 2016. "Oil prices and real estate investment trusts (REITs): Gradual-shift causality and volatility transmission analysis," Energy Economics, Elsevier, vol. 60(C), pages 168-175.
    7. Alfredo M. Pereira & Martin B. Schmidt, 2007. "Structural Breaks in Public Infrastructure Investment in the U.S," Working Papers 55, Department of Economics, College of William and Mary.
    8. repec:kap:iecepo:v:14:y:2017:i:4:d:10.1007_s10368-016-0355-1 is not listed on IDEAS
    9. Salamaliki, Paraskevi K. & Venetis, Ioannis A., 2013. "Energy consumption and real GDP in G-7: Multi-horizon causality testing in the presence of capital stock," Energy Economics, Elsevier, vol. 39(C), pages 108-121.
    10. Yang Fan & Teng Jianzhou, 2011. "Studying on the monetary transmission mechanism in China in the presence of structural changes," China Finance Review International, Emerald Group Publishing, vol. 1(4), pages 334-357, September.

    More about this item


    Trend break; Structural change; Causality tests; Forecasting;

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling


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