A1183
Title: Online breakpoint - detection in cointegrating relationships
Authors: Leopold Soegner - Institute for Advanced Studies (Austria) [presenting]
Martin Wagner - University of Klagenfurt, Bank of Slovenia and Institute for Advanced Studies, Vienna (Austria)
Abstract: A closed-end consistent monitoring procedure is developed with the goal of detecting structural changes in cointegrating relationships. A vector error correction model is considered and allows for different specifications of the deterministic terms. A monitoring test statistic is proposed to investigate the stability of cointegrating relationships. The asymptotic distribution of the test statistic is obtained under the null hypothesis of no structural breaks. A calibration period is used for parameter estimation, after which online break-point detection is performed. The procedure stops at the first time point when the test statistic exceeds the corresponding critical value. A simulation study is provided to investigate the finite sample properties of our monitoring procedure.
