Cobra: A package for co-breaking analysis

The purpose of this paper is to introduce Cobra, an econometric software package designed for CO-BReaking Analysis. Cobra is programmed in Ox, see Doornik (2002), and consists of three modules: Firstly, the CobraDgp module is a class derived from the Database class and enables the user to generate a multivariate time series that is subject to multiple breaks in its intercept as well as linear trend. Secondly, the Cobra module is derived from the Modelbase class and implements two algorithms for the estimation of co-breaking relationships, as outlined in Massmann (2003). Taking advantage of the capabilities provided by Modelbase, Cobra may be loaded into OxPack and used with GiveWin as front end, see Doornik & Hendry (2001). Finally, CobraSim is derived from the Simulation class and wrapped around CobraDgp and Cobra to allow a straightforward implementation of Monte Carlo experiments. After a brief introduction of the concept of co-breaking, as suggested by Hendry (1996), the paper proceeds to illustrate Cobra by means of an empirical example as well as a simple Monte Carlo. Excerpts of Ox code as well as screenshots are provided. ∗I am very grateful to the members of the ox-users discussion group, above all to Richard Lewney, for their prompt and constructive response to my queries. A special thank goes to Charles Bos for his help in the development of Cobra as OxPack module. All remaining errors are of course mine. †This is a preliminary version of the paper. Please do not quote without the author’s consent. Comments and suggestions are very welcome.