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Structural breaks and time-varying granger-causality: testing the spanning hypothesis
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Orientador(es)
Resumo(s)
This paper analyzes time-varying Granger-causality in the context of structural breaks
and changes, employing recursive and recursive evolving window algorithms. A novel
approach using the Flexible Fourier Form (Gallant, 1981) for modeling structural
breaks is developed, and it is shown that there are no significant size distortions or
power losses while accounting for structural breaks of unknown form and date in the
deterministic component. Our methodology, applied to the Yield Curve Spanning Hy pothesis, reveals that the hypothesis cannot be universally upheld, as the yield curve
only occasionally spans relevant information to predict yields.
Descrição
Palavras-chave
Granger-causality Flexible fourier form Time-varying causality Structural breaks Yield curve Spanning hypothesis Recursive test