Structural Changes in Large Economic Datasets: A Nonparametric Homogeneity Test
Economics Letters, Vol. 176, pp. 55-59
- Research Area:
- Systemic Risk Lab
- Mar 2019
This paper proposes a Bayesian nonparametric homogeneity test for distributional changes. We provide an asymptotic approximation of the Bayes factor and show that it is related to the Shannon entropy. The proposed test is suitable for large high-dimensional datasets which otherwise require time-consuming computation for posterior approximation. An analysis on the FRED-QD macroeconomic dataset shows the ability of the test to detect relevant structural changes in the US economy.
- Link to Publication
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