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Bayesian Tests for Co-Integration in the Case of Structural Breaks : An Application to the Analysis of Wage Moderation in France

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  • Michel LUBRANO

    (GREQAM-CNRS)

Abstract

This paper considers a special non-linear time series problem, that of testing for co-integration in a Bayesian framework when there is a break in the co-integrating relationship. It is shown that a partial linearization of the likelihood function solves many puzzling questions, in particular identification and common factor restrictions which are originally imbedded in the model. A generalization of the Jeffreys' prior is derived for the dynamic parameter which monitors co-integration. The procedure is applied to a one time much debated question in France which concerns the wage regulation policy implemented at the beginning of the eighties.

Suggested Citation

  • Michel LUBRANO, 1995. "Bayesian Tests for Co-Integration in the Case of Structural Breaks : An Application to the Analysis of Wage Moderation in France," Discussion Papers (REL - Recherches Economiques de Louvain) 1995044, Universit√© catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvre:1995044
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    File URL: http://www.jstor.org/stable/40724105
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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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