Regime-switching cointegration

Markus Jochmann, Gary Koop

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We develop methods for Bayesian inference in vector error correction models which are subject to a variety of switches in regime (e.g., Markov switches in regime or structural breaks). An important aspect of our approach is that we allow both the cointegrating vectors and the number of cointegrating relationships to change when the regime changes. We show how Bayesian model averaging or model selection methods can be used to deal with the high-dimensional model space that results. Our methods are used in an empirical study of the Fisher effect.
Original languageEnglish
Pages (from-to)35–48
Number of pages14
JournalStudies in Nonlinear Dynamics and Econometrics
Issue number1
Early online date28 Feb 2014
Publication statusPublished - Feb 2014


  • structural breaks
  • model averaging
  • Markov switching
  • cointegration
  • Bayesian

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