A number of unit root tests which accommodate a deterministic level shift at a known point in time are compared in a Monte Carlo study. The tests differ in the way they treat the deterministic term of the DGP. It turns out that Phillips-Perron type tests have very poor small sample properties...

A new kind of mixture autoregressive model with GARCH errors is introduced and applied to the U.S. short-term interest rate. According to the diagnostic tests developed in the article and further informal checks, the model is capable of capturing both of the typical characteristics of the...

The role of expectations for economic fluctuations has received considerable attention in recent business cycle analysis. We exploit Markov regime switching models to identify shocks in cointegrated structural vector autoregressions and investigate different identification schemes for bi-variate...

A central issue of monetary policy analysis is the specification of monetary policy shocks. In a structural vector autoregressive setting there has been some controversy about which restrictions to use for identifying the shocks because standard theories do not provide enough information to...

The expectations hypothesis of the term structure of interest rates is tested using monthly Eurodollar deposit rates for maturities 1, 3 and 6 months covering the period 1983:1-1996:6. Whereas classical regression-based tests indicate rejection, tests based on a new model allowing for potential...

In structural vector autoregressive (SVAR) models identifying restrictions for shocks and impulse responses are usually derived from economic theory or institutional constraints. Sometimes the restrictions are insufficient for identifying all shocks and impulse responses. In this paper it is...