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A Time Series Model of Multiple Structural changes in Level, Trend and Variance


  • Jiahui Wang


  • Eric Zivot

    (University of Washington)


We consider a deterministically trending dynamic time series model in which multiple changes in level, trend and error variance are modeled explicitly and the number but not the timing of the changes are known. Estimation of the model is made possible by the use of the Gibbs sampler. The determination of the number of structural breaks and the form of structural change is considered as a problem of model selection and we compare the use of marginal likelihoods, posterior odds ratios and Schwarz' BIC model selection criterion to select the most appropriate model from the data. We evaluate the efficacy of the Bayesian approach using a small Monte Carlo experiment. As empirical examples, we investigate structural changes in the U.S. ex-post real interest rate and in a long time series of U.S. GDP.

Suggested Citation

  • Jiahui Wang & Eric Zivot, 1999. "A Time Series Model of Multiple Structural changes in Level, Trend and Variance," Econometrics 9903002, EconWPA, revised 31 Mar 1999.
  • Handle: RePEc:wpa:wuwpem:9903002
    Note: Type of Document - Adobe Acrobat; prepared on PC using TeX; to print on Postscript; pages: 13 ; figures: included

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    References listed on IDEAS

    1. Engel, Charles & Kim, Chang-Jin, 1999. "The Long-Run U.S./U.K. Real Exchange Rate," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(3), pages 335-356, August.
    2. Engel, Charles & Hakkio, Craig S, 1996. "The Distribution of Exchange Rates in the EMS," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 1(1), pages 55-67, January.
    3. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-856, July.
    4. Jushan Bai, 1997. "Estimation Of A Change Point In Multiple Regression Models," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 551-563, November.
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    More about this item


    BIC; Gibbs sampling; multiple structural changes; posterior odds ratio;

    JEL classification:

    • 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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