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Tests for random coefficient variation in vector autoregressive models

Author

Listed:
  • Dante Amengual

    (CEMFI, Spain)

  • Gabriele Fiorentini

    (Università di Firenze, Italy; Rimini Centre for Economic Analysis)

  • Enrique Sentana

    (CEMFI, Spain)

Abstract

We propose the information matrix test to assess the constancy of mean and variance parameters in vector autoregressions. We additively decompose it into several orthogonal components: conditional heteroskedasticity and asymmetry of the innovations, and their unconditional skewness and kurtosis. Our Monte Carlo simulations explore both its finite size properties and its power against i.i.d. coefficients, persistent but stationary ones, and regime switching. Our procedures detect variation in the autoregressive coefficients and residual covariance matrix of a Var for the US GDP growth rate and the statistical discrepancy, but they fail to detect any covariation between those two sets of coefficients.

Suggested Citation

  • Dante Amengual & Gabriele Fiorentini & Enrique Sentana, 2021. "Tests for random coefficient variation in vector autoregressive models," Working Paper series 21-21, Rimini Centre for Economic Analysis.
  • Handle: RePEc:rim:rimwps:21-21
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    GDP; GDI; Hessian matrix; Information matrix test; Outer product of the score;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts

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