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Specification tests for time-varying parameter models with stochastic volatility

Chan, Joshua

Description

We propose an easy technique to test for time-variation in coefficients and volatilities. Specifically, by using a noncentered parameterization for state space models, we develop a method to directly calculate the relevant Bayes factor using the Savage-Dickey density ratio — thus avoiding the computation of the marginal likelihood altogether. The proposed methodology is illustrated via two empirical applications. In the first application we test for time-variation in the volatility of inflation...[Show more]

CollectionsANU Research Publications
Date published: 2016
Type: Journal article
URI: http://hdl.handle.net/1885/197100
Source: Econometric Reviews
DOI: 10.1080/07474938.2016.1167948
Access Rights: Open Access

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