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on Econometric Time Series |
| By: | Gary M. Koop; Simon M. Potter |
| Abstract: | This paper develops a new approach to change-point modeling that allows the number of change-points in the observed sample to be unknown. The model we develop assumes regime durations have a Poisson distribution. It approximately nests the two most common approaches: the time varying parameter model with a change-point every period and the change-point model with a small number of regimes. We focus considerable attention on the construction of reasonable hierarchical priors both for regime durations and for the parameters which characterize each regime. A Markov Chain Monte Carlo posterior sampler is constructed to estimate a change-point model for conditional means and variances. Our techniques are found to work well in an empirical exercise involving US GDP growth and inflation. Empirical results suggest that the number of change-points is larger than previously estimated in these series and the implied model is similar to a time varying parameter (with stochastic volatility) model. |
| Keywords: | Bayesian; structural break; Markov Chain Monte Carlo; hierarchical prior |
| JEL: | C11 C22 E17 |
| Date: | 2004–11 |
| URL: | http://d.repec.org/n?u=RePEc:lec:leecon:04/31&r=ets |
| By: | Dufourt (BETA - University Louis Pasteur) |
| Abstract: | Linear and Hodrick-Prescott detrending methods do not provide a good approximation of the business cycle when output contains a unit root. I use the multivariate Beveridge-Nelson decomposition to document the main patterns of US postwar business cycles when output and some other variables are assumed to be integrated I(1) processes. I show that the business cycle identified in this way displays some important differences with those obtained from the preceding methods. I then evaluate the ability of various dynamic stochastic general equilibrium (DSGE) models to replicate the main aspects of this business cycle. Among competing models, I find that the best specification involves an economy hit simultaneously by both technological and monetary shocks, in a context of price stickiness and limited (but insufficient) accommodation by the monetary authorities. Hence, the data favor the model advocated by the New-Neoclassical Synthesis rather than its purely classical (RBC type and flexible price) counterparts. |
| Keywords: | Business cycles, Beveridge-Nelson decomposition, Prices rigidity |
| JEL: | E32 |
| Date: | 2005–01–05 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpma:0501003&r=ets |
| By: | Denis Larocque; Michel Normandin |
| Abstract: | This paper presents and assesses a procedure to estimate conventional parameters characterizing fluctuations at the business cycle frequency, when the economic agents' information set is superior to the econometrician's one. Specifically, we first generalize the conditions under which the econometrician can estimate these 'cyclical fluctuation' parameters from augmented laws of motion for forcing variables that fully recover the agents' superior information. Second, we document the econometric properties of the estimates when the augmented laws of motion are possibly misspecified. Third, we assess the ability of certain information criteria to detect the presence of superior information. |
| Keywords: | Block bootstrap, Hidden variables, Laws of motion for forcing variables, Monte Carlo simulations |
| JEL: | C14 C15 C32 E32 |
| Date: | 2004 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:lacicr:0434&r=ets |
| By: | Gultekin Isiklar (State University of New York at Albany) |
| Abstract: | We impose a structure on the short-run market inefficiencies in the asset markets and use this structure to identify a structural vector autoregressive model. This novel identification method is based on more reasonable assumptions than the standard approaches and also gives estimates for inefficiency measures in the markets, which are important on their own. Applying our method on the major European stock markets, we find that while the UK shocks were dominant in Europe until 1999, German innovations have been more important since 1999. We also find that the pattern of inefficiencies are consistent with the rational inattention model of Sims (2003). |
| Keywords: | Structural VAR; Overreaction and Underreaction; Stock Market |
| JEL: | C32 G15 D84 |
| Date: | 2005–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpem:0501001&r=ets |