nep-ets New Economics Papers
on Econometric Time Series
Issue of 2006‒05‒27
ten papers chosen by
Yong Yin
SUNY at Buffalo

  1. An asymptotic analysis of nearly unstable inar (1) models By Drost,Feike C.; Akker,Ramon van den; Werker,Bas J.M.
  2. Local asymptotic normality and efficient estimation for inar (P) models By Drost,Feike C.; Akker,Ramon van den; Werker,Bas J.M.
  3. Dynamic conditional correlation analysis of financial market interdependence: An application to Thailand and Indonesia By Kuper, Gerard H.; Lestano
  4. Random walks and cointegration relationships in international parity conditions between Germany and USA for the post Bretton-Woods period By Bevilacqua, Franco
  5. Efficient Bayesian Inference for Multiple Change-Point and Mixture Innovation Models By Giordani, Paolo; Kohn, Robert
  6. Method to Find the VARs Easily By Angela Birk
  7. Forecasting US bond yields at weekly frequency By Riccardo LUCCHETTI; Giulio PALOMBA
  8. Why Did the Sign of the Price-Output Correlation Change? Evidence from a Structural VAR with GARCH Errors By James Peery Cover; C. James Hueng
  9. Duration Dependent Markov-Switching Vector Autoregression: Properties, Bayesian Inference, Software and Application By Matteo Pelagatti
  10. Dynamic Conditional Correlation with Elliptical Distributions By Matteo Pelagatti; Stefania Rondena

  1. By: Drost,Feike C.; Akker,Ramon van den; Werker,Bas J.M. (Tilburg University, Center for Economic Research)
    Abstract: This paper considers integer-valued autoregressive processes where the autoregression parameter is close to unity. We consider the asymptotics of this `near unit root' situation. The local asymptotic structure of the likelihood ratios of the model is obtained, showing that the limit experiment is Poissonian. This Poisson limit experiment is used to construct efficient estimators and tests.
    Keywords: integer-valued times series;Poisson limit experiment;local-to-unity asymptotics
    JEL: C12 C13 C19
    Date: 2006
  2. By: Drost,Feike C.; Akker,Ramon van den; Werker,Bas J.M. (Tilburg University, Center for Economic Research)
    Abstract: Integer-valued autoregressive (INAR) processes have been introduced to model nonnegative integervalued phenomena that evolve in time. The distribution of an INAR(p) process is determined by two parameters: a vector of survival probabilities and a probability distribution on the nonnegative integers, called an immigration or innovation distribution. This paper provides an efficient estimator of the parameters, and in particular, shows that the INAR(p) model has the Local Asymptotic Normality property.
    Keywords: count data;integer-valued time series;information loss structure
    JEL: C12 C13 C19
    Date: 2006
  3. By: Kuper, Gerard H.; Lestano (Groningen University)
    Abstract: This paper examines the dynamic linkages among financial markets in Thailand and Indonesia. In particular, we focus on the cross-border relationship in individual markets and on the relationship between finan- cial markets within each country. We find that while tight monetary policy pursued by Thailand authorities helped to defend the exchange rate at the outbreak of the financial crisis, it had little consequences for Indonesia at the end of 1998. The correlations between countries within each of the financial market reveals a certain degree of interde- pendence among countries, which is lower during crises.
    Date: 2006
  4. By: Bevilacqua, Franco (United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology)
    Abstract: This paper is based on a recent paper by Juselius and MacDonald (2000, 2003) and two `Journal of Econometrics' article s by Juselius (1995) and Johansen and Juselius (1992). The basic feature in all these articles is that the joint modelling of international parity conditions, namely ppp and uip, produces stationary relations showing an important interaction between the goods and the capital markets. We replaced the consumer price index (CPI) considered by Juselius and MacDonald with the producer price index (PPI) to check whether the international parity relationships still cointegrate. To our surprise we outstandingly produced similar results to those by Juselius and MacDonald, suggesting that the cointegration relationships in the international parity conditions hold also if we use different measures of prices. What is striking in our results is that even if there is no direct cointegration relation between CPI and PPI both in Germany and USA, the cointegration relation found between ppp and uip still holds notwithstanding of how ppp is measured.
    Keywords: ppp, uip, Fisher parity
    JEL: E31 E43 F31 F32
    Date: 2006
  5. By: Giordani, Paolo (Research Department, Central Bank of Sweden); Kohn, Robert (School of Economics, School of Banking and Finance)
    Abstract: Time series subject to parameter shifts of random magnitude and timing are commonly modeled with a change-point approach using Chib's (1998) algorithm to draw the break dates. We outline some advantages of an alternative approach in which breaks come through mixture distributions in state innovations, and for which the sampler of Gerlach, Carter and Kohn (2000) allows reliable and efficient inference. We show how this approach can be used to (i) model shifts in variance that occur independently of shifts in other parameters (ii) draw the break dates efficiently in change-point and regime-switching models with either Markov or non-Markov transition probabilities. We extend the proofs given in Carter and Kohn (1994) and in Gerlach, Carter and Kohn (2000) to state-space models with system matrices which are functions of lags of the dependent variables, and we further improve the algorithms in Gerlach, Carter and Kohn by introducing to the time series literature the concept of adaptive Metropolis-Hastings sampling for discrete latent variable models. We develop an easily implemented adative algorithm that promises to sizably reduce computing time in a variety of problems including mixture innovation, change-point, regime-switching, and outlier detection.
    Keywords: Structural breaks; Parameter instability; Change-point; State-space; Mixtures; Discrete latent variables; Adaptive Metropolis-Hastings
    JEL: C11 C15 C22
    Date: 2006–05–01
  6. By: Angela Birk
    Abstract: The paper shows an easy method to get the impulse responses of VARs of a stochastic recursive dynamic macro model by defining the transition matrix and the stationary distribution function of a model using the model, i.e. economic theory, itself.
  7. By: Riccardo LUCCHETTI (Universita' Politecnica delle Marche, Dipartimento di Economia); Giulio PALOMBA ([n.d.])
    Abstract: Forecasting models for bond yields often use macro data to improve their properties. Unfortunately, macro data are not available at frequencies higher than monthly.;In order to mitigate this problem, we propose a nonlinear VEC model with conditional heteroskedasticity (NECH) and find that such model has superior in-sample performance than models which fail to encompass nonlinearities and/or GARCH-type effects.;Out-of-sample forecasts by our model are marginally superior to competing models; however, the data points we used for evaluating forecasts refer to a period of relative tranquillity on the financial markets, whereas we argue that our model should display superior performance under "unusual" circumstances.
    Keywords: conditional heteroskedasticity, forecasting, interest rates, nonlinear cointegration
    JEL: C32 C53 E43
    Date: 2006–05
  8. By: James Peery Cover (Department of Economics, Finance & Legal Studies, University of Alabama); C. James Hueng (Department of Economics, Western Michigan University)
    Abstract: It is generally agreed that the price-output correlation in the United States was positive prior to the Second World War, but became negative during the postwar period (at least by 1972). This paper offers evidence that the price-output correlation changed signs because of a decrease in the variability of aggregate demand. A structural VAR with bivariate GARCH (1,1) errors is used to estimate a times series of price-output correlations as well as of the conditional variances of the structural shocks to AD and AS. It is found that during the postwar period the price-output correlation is negative and significantly different from zero only when the standard deviation of the AD shock is less than that of the AS shock.
    Keywords: Price-Output Correlation, Structural VAR, Supply and Demand Shocks, Blanchard-Quah Decomposition
    JEL: E3 C32
    Date: 2006–03
  9. By: Matteo Pelagatti
    Abstract: Duration dependent Markov-switching VAR (DDMS-VAR) models are time series models with data generating process consisting in a mixture of two VAR processes. The switching between the two VAR processes is governed by a two state Markov chain with transition probabilities that depend on how long the chain has been in a state. In the present paper we analyze the second order properties of such models and propose a Markov chain Monte Carlo algorithm to carry out Bayesian inference on the model’s unknowns. Furthermore, a freeware software written by the author for the analysis of time series by means of DDMS-VAR models is illustrated. The methodology and the software are applied to the analysis of the U.S. business cycle.
    Keywords: Markov-switching, business cycle, Gibbs sampler, duration dependence, vector autoregression
    JEL: C11 C15 C32 C41 E32
    Date: 2003–08
  10. By: Matteo Pelagatti; Stefania Rondena
    Abstract: The Dynamic Conditional Correlation (DCC) model of Engle has made the estimation of multivariate GARCH models feasible for reasonably big vectors of securities’ returns. In the present paper we show how Engle’s multi-step estimation of the model can be easily extended to elliptical conditional distributions and apply different leptokurtic DCC models to twenty shares listed at the Milan Stock Exchange.
    Keywords: Multivariate GARCH, Correlation, Elliptical distributions, Fat Tails
    JEL: C32 C51 C87
    Date: 2004–06

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