Monitoring structural change in variance, with an application to European nominal exchange rate volatility
1999-06-23
Research Paper
This publication is part of collection
| Related Files |
|---|
|
Download File
(feweco19990625145441.ps, 4.8MB) |
View PDF Version
(feweco19990625145441.pdf, 1.4MB) |
In this paper we propose a sequential testing approach for a structural change in the variance of a time series, which amounts to a procedure with a controlled asymptotic size as we repeat the test. Our approach builds on that taken in Chu, Stinchcombe and White (1996) for structural change in the parameters of a linear regression model. We provide simulation evidence to examine the empirical size and power of our procedure. We apply our approach to 14 weekly observed European exchange rates for 1985-1998 and we find ample evidence for the presence of structural changes in nominal exchange rate volatility, where generally a reduction of volatility is found.
Keywords
Automatically Extracted Terms
- variance
- change
- procedure
- exchange
- figure
- monitoring procedure
- monitoring
- result
- volatility
- method
- process
- european exchange rates
- value
- power
- exchange rates
- table
- exchange rate volatility
- sequence
- sample
- observation
