Modelling Breaks and Clusters in the Steady States of Macroeconomic Variables

Joshua Chan and Gary Koop

No 2011-22, SIRE Discussion Papers from Scottish Institute for Research in Economics (SIRE)

Abstract: Macroeconomists working with multivariate models typically face uncertainty over which (if any) of their variables have long run steady states which are subject to breaks. Furthermore, the nature of the break process is often unknown. In this paper, we draw on methods from the Bayesian clustering literature to develop an econometric methodology which: i) finds groups of variables which have the same number of breaks; and ii) determines the nature of the break process within each group. We present an application involving a five-variate steady-state VAR.

Date: 2011
New Economics Papers: this item is included in nep-ets and nep-mac
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Related works:
Journal Article: Modelling breaks and clusters in the steady states of macroeconomic variables (2014)
Working Paper: Modelling Breaks and Clusters in the Steady States of Macroeconomic Variables (2013)
Working Paper: Modelling breaks and clusters in the steady states of macroeconomic variables (2012)
Working Paper: Modelling Breaks and Clusters in the Steady States of Macroeconomic Variables (2011)
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