A new structural break model, with an application to Canadian inflation forecasting

John Maheu and Yong Song ()

International Journal of Forecasting, 2014, vol. 30, issue 1, 144-160

Abstract: This paper develops an efficient approach to modelling and forecasting time series data with an unknown number of change-points. Using a conjugate prior and conditioning on time-invariant parameters, the predictive density and the posterior distribution of the change-points have closed forms. Furthermore, the conjugate prior is modeled as hierarchical in order to exploit the information across regimes. This framework allows breaks in the variance, the regression coefficients, or both. The regime duration can be modelled as a Poisson distribution. A new, efficient Markov chain Monte Carlo sampler draws the parameters from the posterior distribution as one block. An application to a Canadian inflation series shows the gains in forecasting precision that our model provides.

Keywords: Multiple change-points; Regime duration; Inflation targeting; Predictive density; MCMC (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (10)

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Related works:
Working Paper: A new structural break model with application to Canadian inflation forecasting (2012)
Working Paper: A New Structural Break Model with Application to Canadian Inflation Forecasting (2012)
Working Paper: A New Structural Break Model with Application to Canadian Inflation Forecasting (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfor:v:30:y:2014:i:1:p:144-160

DOI: 10.1016/j.ijforecast.2013.06.004

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