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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 630:
Bayesian simultaneous determination of structural breaks and lag lengths

Brigitta Hultblad () and Sune Karlsson ()

Abstract: The detection of structural change and determination of lag lengths are long-standing issues in time series analysis. This paper demonstrates how these can be successfully married in a Bayesian analysis. By taking account of the inherent uncertainty about the lag length when deciding on the number of structural breaks and vice versa we avoid some common pitfalls and are able to draw more robust conclusions. The approach is illustrated using both real and simulated data.

Keywords: Regime shifts; Model uncertainty; Model averaging; Markov chain Monte Carlo; Real interest rate; (follow links to similar papers)

JEL-Codes: C11; C15; C22; C51; (follow links to similar papers)

20 pages, June 8, 2006

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hastef0630.rev.pdf    PDF-file (307kB) 
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This paper is forthcoming as:
Hultblad, Brigitta and Sune Karlsson, 'Bayesian simultaneous determination of structural breaks and lag lengths', Studies in Nonlinear Dynamics & Econometrics.

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