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A Bayesian Analysis of Structural Changes with an Application to the Displacement Effect
Author(s) -
Kozumi Hideo,
Hasegawa Hikaru
Publication year - 2000
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/1467-9957.00206
Subject(s) - bayesian probability , hierarchical dirichlet process , structural change , bayesian vector autoregression , feature (linguistics) , dirichlet distribution , econometrics , dirichlet process , displacement (psychology) , set (abstract data type) , process (computing) , data set , point (geometry) , economics , latent dirichlet allocation , computer science , mathematics , artificial intelligence , topic model , macroeconomics , psychology , mathematical analysis , linguistics , philosophy , geometry , programming language , psychotherapist , boundary value problem , operating system
In this paper we propose a new approach to the problem of structural change from a Bayesian point of view. Our approach is based on a hierarchical model with a Dirichlet process prior. A notable feature of the Dirichlet process is its discreteness which is useful for detecting structural changes. The approach developed in the paper is illustrated using simulated and real data sets. For the real data set, we examine possible structural changes in government expenditure in Japan using the annual data from 1957 to 1995. It is shown that two structural breaks occurred, before and after the first oil crisis.