Monitoring structural change in vector error correction models

Project Lead: Leopold Sögner
Team: Ines Fortin, Masoud Abdollahi Mobarakeh
Duration: April 2022 – March 2025
Funding: Oesterreichische Nationalbank (OeNB) Anniversary Fund - Project Number 18766

This research project develops and applies econometric tools to perform online break-point detection (monitoring) in a Johansen (1995)-type vector error correction model. To monitor structural changes the break-point detection procedures of Seo (1998) and Hansen and Johansen (1999) are planned to be adapted to the monitoring case. The monitoring tools are applied to investigate the stability of money demand and some arbitrage parities discussed in finance literature. The tools are made available in an R-package.