Regime-Switching Cointegration*

Markus Jochmann () and Gary Koop ()

No 1125, Working Papers from University of Strathclyde Business School, Department of Economics

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; Markov switching; structural breaks; cointegration (search for similar items in EconPapers)
JEL-codes: C11 C32 C52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-ets
Date: 2011-05
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http://www.strath.ac.uk/media/departments/economic ... 2011/11-25_Final.pdf (application/pdf)

Related works:
Working Paper: Regime-Switching Cointegration (2011)
Working Paper: Regime-Switching Cointegration (2011)
Working Paper: Regime-Switching Cointegration (2011)
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Persistent link: http://EconPapers.repec.org/RePEc:str:wpaper:1125

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