This paper introduces a new model of structural breaks which assumes that structural breaks are driven by large economic shocks. The model specifies that both the timing and size of breaks are stochastic and it can be used to investigate the impact of large economic shocks on the stability of...

This paper applies a new model of structural breaks developed by Kapetanios and Tzavalis (2004) to investigate if there exist structural changes in the mean reversion parameter of US macroeconomic series. Ignoring such type of breaks may lead to spurious evidence of unit roots in the...

This paper employes a parametric model of structural breaks in the mean of stock returns which allows them to be endogenously driven by large positive or negative stock market return shocks. These shocks can be taken to reflect important market announcements, monetary policy regime shifts and/or...

This paper presents a new stochastic volatility model which allows for persistent shifts in volatility of stock market returns, referred to as structural breaks. These shifts are endogenously driven by large return shocks (innovations), reflecting large pieces of market news. These shocks are...

In this paper we suggest panel data unit root tests which allow for a structural breaks in the individual effects or linear trends of panel data models. This is done under the assumption that the disturbance terms of the panel are heterogeneous and serially correlated. The limiting distributions...

Analytical asymptotic local power functions are employed to study the effects of general form short term serial correlation on �fixed-T panel data unit root tests. Two models are considered, one that has only individual intercepts and one that has both individual intercepts and individual...

The asymptotic local power of least squares based fixed-T panel unit root tests allowing for a structural break in their individual effects and/or incidental trends of the AR(1) panel data model is studied. These tests correct the least squares estimator of the autoregressive coefficient of this...

Using a novel methodology, we offer new evidence that a threshold relationship exists for Okun's law. We use a logistic smoothed transition regression (LSTR) model where possible threshold endogeneity is addressed based on copula theory. We also suggest a new test of the linearity hypothesis...

In this paper we investigate whether the currency risk is priced in international stock markets. We suggest a parsimonious version of the international capital asset pricing model with an EGARCH-M(1,1) specification of the second moments' dynamics of stock and currency returns, assuming that the...

In this paper, a Bayesian approach is suggested to compare unit root models with stationary models when both the level and the error variance are subject to structural changes (known as breaks) of an unknown date. The paper utilizes analytic and Monte Carlo integration techniques for calculating...