A0864
Title: Monitoring structural breaks 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 method is developed to perform online breakpoint detection in the non-stationary case. Specifically, an error correction model is considered where structural breaks may occur in cointegrating and/or adjustment vectors, where the cointegration rank either remains the same or changes. Lagrange-multiplier tests are developed to monitor these structural breaks. Following a calibration period used to estimate the model parameters, monitoring starts, and it halts the first time the test statistic exceeds the corresponding critical value. Through an extensive simulation study, the performance of the monitoring procedure is thoroughly investigated.
