COINTEGRATION AND CHANGES IN REGIME - THE JAPANESE CONSUMPTION FUNCTION

Authors
HALL SG PSARADAKIS Z SOLA M
Citation
Sg. Hall et al., COINTEGRATION AND CHANGES IN REGIME - THE JAPANESE CONSUMPTION FUNCTION, Journal of applied econometrics, 12(2), 1997, pp. 151-168
Citations number
40
Categorie Soggetti
Economics,"Social Sciences, Mathematical Methods
Journal title
Journal of applied econometrics → ACNP
ISSN journal
08837252
Volume
12
Issue
2
Year of publication
1997
Pages
151 - 168
Database
ISI
SICI code
0883-7252(1997)12:2<151:CACIR->2.0.ZU;2-T
Abstract
In this paper we examine a model of cointegration where long-run param eters are subject to switching between several different cointegrating regimes. These shifts are allowed to be governed by the outcome of an unobserved Markov chain with unknown transition probabilities. We ill ustrate this approach using Japanese data on consumption and disposabl e income, and find that the data favour a Markov-switching long-run re lationship over a standard temporally stable formulation. (C) 1997 by John Wiley & Sons, Ltd.