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A Methodology For Detecting Breaks In The Mean And Covariance Structure Of Time Series

  • Mohamed Boutahar

    ()

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)

  • Jamel Jouini

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579, FSEGN - Faculté des Sciences Economiques et de Gestion - université 7 Novembre de Carthage)

Some structural break techniques defined in the time and frequency domains are presented to explore, at the same time, the empirical evidence of the mean and covariance instability by uncovering regime-shifts in some inflation series. To that effect, we pursue a methodology that combines two approaches; the first is defined in the time domain and is designed to detect mean-shifts, and the second is defined in the frequency domain and is adopted to study the instability problem of the covariance function of the series. The proposed methodology has a double interest since, besides the detection of regime-shifts occasioned in the covariance structure of the series, it allows taking into account the presence of mean-shifts in this series. Note that unlike the works existing in the literature which often adopt a single technique to study the break identification problem, our methodology combines two approaches, parametric and nonparametric, to examine this problem.

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Paper provided by HAL in its series Working Papers with number halshs-00354249.

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Date of creation: 01 Sep 2007
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Handle: RePEc:hal:wpaper:halshs-00354249
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  1. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
  2. Loretan, M. & Phillips, P.C.B., 1992. "Testing the Covariance Stationarity of Heavy-Tailed Time Series: An Overview of the Theory with Applications to Several Financial Datasets," Working papers 9208, Wisconsin Madison - Social Systems.
  3. Andrew T. Levin & Jeremy M. Piger, 2003. "Is inflation persistence intrinsic in industrial economies?," Working Papers 2002-023, Federal Reserve Bank of St. Louis.
  4. BAI, Jushan & PERRON, Pierre, 1998. "Computation and Analysis of Multiple Structural-Change Models," Cahiers de recherche 9807, Universite de Montreal, Departement de sciences economiques.
  5. Kwiatkowski, D. & Phillips, P.C.B. & Schmidt, P., 1990. "Testing the Null Hypothesis of Stationarity Against the Alternative of Unit Root : How Sure are we that Economic Time Series have a Unit Root?," Papers 8905, Michigan State - Econometrics and Economic Theory.
  6. Jamel JOUINI & Mohamed BOUTAHAR, 2007. "wrong estimation of the true number of shifts in structural break models: Theoretical and numerical evidence," Economics Bulletin, AccessEcon, vol. 3(3), pages 1-10.
  7. Jeff Fuhrer & George Moore, 1993. "Inflation persistence," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
  8. Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Universite de Montreal, Departement de sciences economiques.
  9. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
  10. Mohamed Safouane Ben Aissa & Mohamed Boutahar & Jamel Jouini, 2004. "Bai and Perron's and spectral density methods for structural change detection in the US inflation process," Applied Economics Letters, Taylor & Francis Journals, vol. 11(2), pages 109-115.
  11. Jouini, Jamel & Boutahar, Mohamed, 2005. "Evidence on structural changes in U.S. time series," Economic Modelling, Elsevier, vol. 22(3), pages 391-422, May.
  12. Jushan Bai, 1995. "Estimating Multiple Breaks One at a Time," Working papers 95-18, Massachusetts Institute of Technology (MIT), Department of Economics.
  13. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
  14. repec:ebl:ecbull:v:3:y:2007:i:3:p:1-10 is not listed on IDEAS
  15. Ahamada, Ibrahim, 2002. "Tests for covariance stationarity and white noise, with an application to Euro/US dollar exchange rate: An approach based on the evolutionary spectral density," Economics Letters, Elsevier, vol. 77(2), pages 177-186, October.
  16. Thomas Mikosch & Catalin Starica, 2004. "Non-stationarities in financial time series, the long range dependence and the IGARCH effects," Econometrics 0412005, EconWPA.
  17. Bilke, L., 2005. "Break in the Mean and Persistence of Inflation: a Sectoral Analysis of French CPI," Working papers 122, Banque de France.
  18. Pagan, Adrian R. & Schwert, G. William, 1990. "Testing for covariance stationarity in stock market data," Economics Letters, Elsevier, vol. 33(2), pages 165-170, June.
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