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Bayesian analysis of a vector autoregressive model with multiple structural breaks

Author

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  • Katsuhiro Sugita

    (Faculty of Law and Letters, University of the Ryukyus)

Abstract

This paper develops a Bayesian approach for analyzing a vector autoregressive model with multiple structural breaks based on MCMC simulation methods, extending a method developed for the univariate case by Wang and Zivot (2000). It derives the conditional posterior densities using an independent Normal-Wishart prior. The number of structural breaks is chosen by the posterior model probability based on the marginal likelihood, calculated here by the method of Chib (1995) rather than the Gelfand-Dey (1994) method used by Wang and Zivot. Monte Carlo simulations demonstrate that the approach provides generally accurate estimation for the number of structural breaks as well as their locations.

Suggested Citation

  • Katsuhiro Sugita, 2008. "Bayesian analysis of a vector autoregressive model with multiple structural breaks," Economics Bulletin, AccessEcon, vol. 3(22), pages 1-7.
    • Handle: RePEc:ebl:ecbull:eb-07c10006
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    References listed on IDEAS

    as
    1. Inclan, Carla, 1993. "Detection of Multiple Changes of Variance Using Posterior Odds," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(3), pages 289-300, July.
    2. Wang, Jiahui & Zivot, Eric, 2000. "A Bayesian Time Series Model of Multiple Structural Changes in Level, Trend, and Variance," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(3), pages 374-386, July.
    3. Kadiyala, K Rao & Karlsson, Sune, 1997. "Numerical Methods for Estimation and Inference in Bayesian VAR-Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(2), pages 99-132, March-Apr.
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    Cited by:

    1. Katsuhiro Sugita, 2015. "Bayesian analysis of the predictive power of the yield curve using a vector autoregressive model with multiple structural breaks," Economics Bulletin, AccessEcon, vol. 35(3), pages 1867-1873.
    2. Katsuhiro Sugita, 2016. "Bayesian inference in Markov switching vector error correction model," Economics Bulletin, AccessEcon, vol. 36(3), pages 1534-1546.

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    More about this item

    Keywords

    Bayesian inference Structural break Cointegration Bayes factor;

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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