Template-Type: ReDIF-Paper 1.0 Series: Tinbergen Institute Discussion Papers Creation-Date: 1997-08-08 Number: 97-078/4 Author-Name: Gary Koop Author-Workplace-Name: University of Edinburgh Author-Name: Herman K. van Dijk Author-Email: firstname.lastname@example.org Author-Workplace-Name: Erasmus University Rotterdam Author-Name: Henk Hoek Author-Workplace-Name: Erasmus University Rotterdam Title: Testing for Integration using Evolving Trend and Seasonals Models: A Bayesian Approach Abstract: This discussion paper resulted in a publication IN the 'Journal of Econometrics', 2000, 97(2), 261-291.
In this paper, we make use of state space models to investigate the presence of stochastic trends in economic time series. A model is specified where such a trend can enter either in the autoregressive representation or in a separate state equation. Tests based on the former are analogous to Dickey-Fullertests of unit roots, while the latter are analogous to KPSS tests of trend-stationarity. We use Bayesian methods to survey the properties of the likelihood function in such models and to calculate posterior odds ratios comparing models with and without stochastic trends. In addition, we extend these ideas to the problem of testing for integration at seasonal frequencies and show how techniques can be used to carry out Bayesian variants of HEGY test or the Canova-Hansen test. Classification-JEL: C11, C12, C32, C52 Keywords: State space models; Bayes Factor; Gibbs sampler; unit root; seasonality File-Url: http://papers.tinbergen.nl/97078.pdf File-Format: application/pdf File-Size: 788910 bytes Handle: RePEc:tin:wpaper:19970078