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Efficient Estimation of the Parameter Path in Unstable Time Series Models

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  • Ulrich K. Müller
  • Philippe-Emmanuel. Petalas

Abstract

The paper investigates inference in non-linear and non-Gaussian models with moderately time-varying parameters. We show that for many decision problems, the sample information about the parameter path can be summarized by an artificial linear and Gaussian model, at least asymptotically. The approximation allows for computationally convenient path estimators and parameter stability tests. Also, in contrast to standard Bayesian techniques, the artificial model can be robustified so that in misspecified models, decisions about the path of the (pseudo-true) parameter remain as good as in a corresponding correctly specified model. Copyright , Wiley-Blackwell.

Suggested Citation

  • Ulrich K. Müller & Philippe-Emmanuel. Petalas, 2010. "Efficient Estimation of the Parameter Path in Unstable Time Series Models," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(4), pages 1508-1539.
    • Handle: RePEc:oup:restud:v:77:y:2010:i:4:p:1508-1539
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    File URL: http://hdl.handle.net/10.1111/j.1467-937X.2010.00603.x
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    Cited by:

    1. Giraitis, Liudas & Kapetanios, George & Marcellino, Massimiliano, 2021. "Time-varying instrumental variable estimation," Journal of Econometrics, Elsevier, vol. 224(2), pages 394-415.
    2. Raffaella Giacomini & Barbara Rossi, 2016. "Model Comparisons In Unstable Environments," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57(2), pages 369-392, May.
    3. Carles Bret'o, 2013. "On idiosyncratic stochasticity of financial leverage effects," Papers 1312.5496, arXiv.org.
    4. Elliott, Graham & Müller, Ulrich K., 2014. "Pre and post break parameter inference," Journal of Econometrics, Elsevier, vol. 180(2), pages 141-157.
    5. Bretó, Carles, 2014. "On idiosyncratic stochasticity of financial leverage effects," Statistics & Probability Letters, Elsevier, vol. 91(C), pages 20-26.
    6. Cyril May & Greg Farrell & Jannie Rossouw, 2018. "Do Monetary Policy Announcements Affect Exchange Rate Returns and Volatility of Returns? Some Evidence from High‐Frequency Intra‐Day South African Data," South African Journal of Economics, Economic Society of South Africa, vol. 86(3), pages 308-338, September.
    7. J. Hoyo & G. Llorente & C. Rivero, 2019. "Testing for Constant Parameters in Nonlinear Models: A Quick Procedure with an Empirical Illustration," Computational Economics, Springer;Society for Computational Economics, vol. 54(1), pages 113-137, June.
    8. Giraitis, L. & Kapetanios, G. & Yates, T., 2014. "Inference on stochastic time-varying coefficient models," Journal of Econometrics, Elsevier, vol. 179(1), pages 46-65.
    9. Palumbo, D., 2021. "Testing and Modelling Time Series with Time Varying Tails," Cambridge Working Papers in Economics 2111, Faculty of Economics, University of Cambridge.

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