Identifying Structural Breaks in Cointegrated VAR Models
The paper describes a procedure for decomposing the deterministic terms in cointegrated VAR models into growth rate parameters and cointegration mean parameters. These parameters express long-run properties of the model. For example, the growth rate parameters tell us how much to expect (unconditionally) the variables in the system to grow from one period to the next, representing the underlying (steady state) growth in the variables. The procedure can be used for analysing structural breaks when the deterministic terms include shift dummies and broken trends. By decomposing the coefficients into interpretable components, different types of structural breaks can be identified. Both shifts in intercepts and shifts in growth rates, or combinations of these, can be tested for. The ability to distinguish between different types of structural breaks makes the procedure superior compared to alternative procedures. Furthermore, the procedure utilizes the information more efficiently than alternative procedures. Finally, interpretable coefficients of different types of structural breaks can be identified.
|Date of creation:||May 2005|
|Date of revision:|
|Contact details of provider:|| Postal: P.O.Box 8131 Dep, N-0033 Oslo, Norway|
Phone: (+47) 21 09 00 00
Fax: +47 - 62 88 55 95
Web page: http://www.ssb.no/en/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- JØrgen Wolters & Helmut LØtkepohl, 1998. "A money demand system for German M3," Empirical Economics, Springer, vol. 23(3), pages 371-386.
- Helmut Lütkepohl & Pentti Saikkonen & Carsten Trenkler, 2004.
"Testing for the Cointegrating Rank of a VAR Process with Level Shift at Unknown Time,"
Econometric Society, vol. 72(2), pages 647-662, 03.
- Lütkepohl, Helmut & Saikkonen, Pentti & Trenkler, Carsten, 2001. "Testing for the cointegrating rank of a VAR process with level shift at unknown time," SFB 373 Discussion Papers 2001,63, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Grayham E. Mizon & David F. Hendry, 1998. "Exogeneity, causality, and co-breaking in economic policy analysis of a small econometric model of money in the UK," Empirical Economics, Springer, vol. 23(3), pages 267-294.
- Søren Johansen & Rocco Mosconi & Bent Nielsen, 2000.
"Cointegration analysis in the presence of structural breaks in the deterministic trend,"
Royal Economic Society, vol. 3(2), pages 216-249.
- Bent Nielsen, 2000. "Cointegration Analysis in the Presence of Structural Breaks in the Deterministic Trend," Econometric Society World Congress 2000 Contributed Papers 1494, Econometric Society.
- Perron, P, 1988.
"The Great Crash, The Oil Price Shock And The Unit Root Hypothesis,"
338, Princeton, Department of Economics - Econometric Research Program.
- Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
When requesting a correction, please mention this item's handle: RePEc:ssb:dispap:422. 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: (L MaasÃ¸)
If references are entirely missing, you can add them using this form.