A0860
Title: Monitoring cointegration in vector autoregressive models
Authors: Masoud Abdollahi - Institute for Advanced Studies (Austria) [presenting]
Leopold Soegner - Institute for Advanced Studies (Austria)
Abstract: A closed-end monitoring tool is developed to perform online break-point detection in the non-stationary case. In particular, a vector error correction model is considered where structural breaks can take place in both cointegrating and adjustment vectors. Lagrange-multiplier tests are obtained for various specifications of the deterministic terms, allowing monitoring of these structural breaks. After a calibration period is used to estimate the model parameters, monitoring is started, while monitoring is stopped the first time the test statistic exceeds the corresponding critical value. In an extensive simulation study, the performance of the monitoring procedure is investigated.
