Oracle efficient estimation of structural breaks in cointegrating regressions

DOI10.1111/JTSA.12593zbMATH Open1493.62073arXiv2001.07949OpenAlexW3159329005MaRDI QIDQ5030952FDOQ5030952

Authors: Karsten Schweikert 

Publication date: 18 February 2022

Published in: Journal of Time Series Analysis (Search for Journal in Brave)

Abstract: In this paper, we propose an adaptive group lasso procedure to efficiently estimate structural breaks in cointegrating regressions. It is well-known that the group lasso estimator is not simultaneously estimation consistent and model selection consistent in structural break settings. Hence, we use a first step group lasso estimation of a diverging number of breakpoint candidates to produce weights for a second adaptive group lasso estimation. We prove that parameter changes are estimated consistently by group lasso and show that the number of estimated breaks is greater than the true number but still sufficiently close to it. Then, we use these results and prove that the adaptive group lasso has oracle properties if weights are obtained from our first step estimation. Simulation results show that the proposed estimator delivers the expected results. An economic application to the long-run US money demand function demonstrates the practical importance of this methodology.

Full work available at URL: https://arxiv.org/abs/2001.07949

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zbMATH Keywords

model selectioncointegrationchange-pointsadaptive group LassoUS money demand

Mathematics Subject Classification ID

Time series, auto-correlation, regression, etc. in statistics (GARCH) (62M10) Asymptotic distribution theory in statistics (62E20) Ridge regression; shrinkage estimators (Lasso) (62J07) Economic time series analysis (91B84)

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