Identifying Structural Breaks in Cointegrated VAR Models

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Papers ; No. 422

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Model Construction and Estimation ; Model Evaluation, Validation, and Selection
• Subject: Johansen procedure ; cointegrated VAR ; structural breaks ; growth rates ; cointegration mean levels.

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hungnes, Håvard
• Event: Veröffentlichung
• (who): Statistics Norway, Research Department
• (where): Oslo
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/192404
• Last update: 10.03.2025, 11:43 AM CET