Regime-switching cointegration

Markus Jochmann () and Gary Koop

Studies in Nonlinear Dynamics & Econometrics, 2015, vol. 19, issue 1, 35-48

Abstract: We develop methods for Bayesian inference in vector error correction models which are subject to a variety of switches in regime (e.g., Markov switches in regime or structural breaks). An important aspect of our approach is that we allow both the cointegrating vectors and the number of cointegrating relationships to change when the regime changes. We show how Bayesian model averaging or model selection methods can be used to deal with the high-dimensional model space that results. Our methods are used in an empirical study of the Fisher effect.

Keywords: Bayesian; cointegration; Markov switching; model averaging; structural breaks (search for similar items in EconPapers)
JEL-codes: C11 C32 C52 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (11)

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Related works:
Working Paper: Regime-Switching Cointegration (2011)
Working Paper: Regime-Switching Cointegration (2011)
Working Paper: Regime-Switching Cointegration (2011)
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DOI: 10.1515/snde-2012-0064

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