Specification tests for time-varying parameter models with stochastic volatility

Chan, JCC

Specification tests for time-varying parameter models with stochastic volatility

Chan, JCC

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Publication Type:: Journal Article
Citation:: Econometric Reviews, 2018, 37 (8), pp. 807 - 823
Issue Date:: 2018-09-14

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Field	Value	Language
dc.contributor.author	Chan, JCC https://orcid.org/0000-0003-3632-128X	en_US
dc.date.issued	2018-09-14	en_US
dc.identifier.citation	Econometric Reviews, 2018, 37 (8), pp. 807 - 823	en_US
dc.identifier.issn	0747-4938	en_US
dc.identifier.uri	http://hdl.handle.net/10453/130428
dc.description.abstract	© 2016 Taylor & Francis Group, LLC. We propose an easy technique to test for time-variation in coefficients and volatilities. Specifically, by using a noncentered parameterization for state space models, we develop a method to directly calculate the relevant Bayes factor using the Savage–Dickey density ratio—thus avoiding the computation of the marginal likelihood altogether. The proposed methodology is illustrated via two empirical applications. In the first application, we test for time-variation in the volatility of inflation in the G7 countries. The second application investigates if there is substantial time-variation in the nonaccelerating inflation rate of unemployment (NAIRU) in the United States.	en_US
dc.relation.ispartof	Econometric Reviews	en_US
dc.relation.isbasedon	10.1080/07474938.2016.1167948	en_US
dc.subject.classification	Econometrics	en_US
dc.title	Specification tests for time-varying parameter models with stochastic volatility	en_US
dc.type	Journal Article
utslib.citation.volume	8	en_US
utslib.citation.volume	37	en_US
utslib.for	1403 Econometrics	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Economics Discipline
utslib.copyright.status	closed_access
pubs.issue	8	en_US
pubs.publication-status	Published	en_US
pubs.volume	37	en_US

Abstract:

© 2016 Taylor & Francis Group, LLC. We propose an easy technique to test for time-variation in coefficients and volatilities. Specifically, by using a noncentered parameterization for state space models, we develop a method to directly calculate the relevant Bayes factor using the Savage–Dickey density ratio—thus avoiding the computation of the marginal likelihood altogether. The proposed methodology is illustrated via two empirical applications. In the first application, we test for time-variation in the volatility of inflation in the G7 countries. The second application investigates if there is substantial time-variation in the nonaccelerating inflation rate of unemployment (NAIRU) in the United States.

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http://hdl.handle.net/10453/130428