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http://hdl.handle.net/10419/55172
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| Title: | | Multivariate methods for monitoring structural change  |
| Authors: | | Groen, Jan J. J. Kapetanios, George Price, Simon |
| Issue Date: | | 2010 |
| Series/Report no.: | | Working Paper // School of Economics and Finance, Queen Mary, University of London 658 |
| Abstract: | | Detection of structural change is a critical empirical activity, but continuous 'monitoring' of series, for structural changes in real time, raises well-known econometric issues that have been explored in a single series context. If multiple series co-break then it is possible that simultaneous examination of a set of series helps identify changes with higher probability or more rapidly than when series are examined on a case-by-case basis. Some asymptotic theory is developed for maximum and average CUSUM detection tests. Monte Carlo experiments suggest that these both provide an improvement in detection relative to a univariate detector over a wide range of experimental parameters, given a sufficiently large number of co-breaking series. This is robust to a cross-sectional correlation in the errors (a factor structure) and heterogeneity in the break dates. We apply the test to a panel of UK price indices. |
| Subjects: | | monitoring structural change panel CUSUM fluctuation test |
| JEL: | | C10 C59 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Working Paper Series, School of Economics and Finance, Queen Mary, University of London
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