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Testing for Parameter Stability in Dynamic Models across Frequencies

  • Candelon Bertrand
  • Cubadda Gianluca

    (METEOR)

This paper contributes to the econometric literature on structural breaks by proposing a test for parameter stability in VAR models at a particular frequency 'omega', where 'omega is an element of [0, pi]'.When a dynamic model is affected by a structural break, the new tests allow for detecting which frequencies of the data are responsible for parameter instability. If the model is locally stable at the frequencies of interest, the whole sample size can be then exploited despite the presence of a break. Two empirical examples illustrate that local instability can concern only the lower frequencies (decrease in the postwar U.S. productivity) or higher frequencies(change in the U.S. monetary policy in the early 80's).

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File URL: http://digitalarchive.maastrichtuniversity.nl/fedora/objects/guid:207e01e2-dcb3-46a3-8dc1-93aa4af97eec/datastreams/ASSET1/content
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Paper provided by Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) in its series Research Memorandum with number 022.

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Date of creation: 2005
Handle: RePEc:unm:umamet:2005022
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  1. Arturo Estrella & Anthony P. Rodrigues & Sebastian Schich, 2000. "How stable is the predictive power of the yield curve? evidence from Germany and the United States," Staff Reports 113, Federal Reserve Bank of New York.
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  8. Michael Dotsey, 1998. "The predictive content of the interest rate term spread for future economic growth," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 31-51.
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  13. Jushan Bai & Robin L. Lumsdaine & James H. Stock, 1998. "Testing For and Dating Common Breaks in Multivariate Time Series," Review of Economic Studies, Oxford University Press, vol. 65(3), pages 395-432.
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  15. Zhongjun Qu & Pierre Perron, 2005. "Estimating and testing structural changes in multivariate regressions," Boston University - Department of Economics - Working Papers Series WP2005-012, Boston University - Department of Economics.
  16. Christiano, Lawrence J. & Vigfusson, Robert J., 2003. "Maximum likelihood in the frequency domain: the importance of time-to-plan," Journal of Monetary Economics, Elsevier, vol. 50(4), pages 789-815, May.
  17. Plosser, Charles I. & Geert Rouwenhorst, K., 1994. "International term structures and real economic growth," Journal of Monetary Economics, Elsevier, vol. 33(1), pages 133-155, February.
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