Template-Type: ReDIF-Paper 1.0
Author-Name: Carsoule, F.
Author-Name-Last: Carsoule
Author-Name-First: Frédéric
Author-Name: Franses, Ph.H.B.F.
Author-Name-Last: Franses
Author-Name-First: Philip Hans
Author-Person: pfr226
Title: Monitoring structural change in variance
Abstract: 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.
Creation-Date: 1999-06-23
File-URL: https://repub.eur.nl/pub/1596/feweco19990625145441.pdf
File-Format: application/pdf
Series: RePEc:ems:eureir
Number: EI 9925A
Keywords: exchange rate volatility, monitoring procedure, structural change, variance
Handle: RePEc:ems:eureir:1596