Generic consistency of the break-point estimators under specification errors in a multiple-break model

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Generic consistency of the break-point estimators under specification errors in a multiple-break model

Author Info

Jushan Bai
Haiqiang Chen
Terence Tai-Leung Chong
Seraph Xin Wang

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Abstract

This paper considers the estimation of multiple-structural-break models under specification errors. A common example in economics is that the true model is measured in level, but a linear-log model is estimated. We show that, under specification errors, if there are more than one break points and if a single-break model is estimated, the estimated break point is consistent for one of the true break points. This consistency result applies to models with multiple regressors where some or all of the regressors are misspecified. Another important contribution of this paper is that we have constructed a Sup-Wald test whose limiting distribution is not affected by model misspecification. Using this robust test, we show that the break points can be estimated sequentially one at a time. Simulation evidence and an empirical application are provided. Copyright © 2008 The Author(s). Journal compilation © Royal Economic Society 2008

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Article provided by Royal Economic Society in its journal Econometrics Journal.

Volume (Year): 11 (2008)
Issue (Month): 2 (07)
Pages: 287-307
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Handle: RePEc:ect:emjrnl:v:11:y:2008:i:2:p:287-307

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Paper
- Seraph Xin Wang & Terence Tai-leung Chong & Haiqiang Chen, 2004. "Generic Consistency of the Break-Point Estimators under Specification Errors in a Multiple-Break Model," Departmental Working Papers _160, Chinese University of Hong Kong, Department of Economics.

Cited by:
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Alastair R. Hall & Sanggohn Han & Otilia Boldea, 2009. "Inference regarding multiple structural changes in linear models with endogenous regressors," Centre for Growth and Business Cycle Research Discussion Paper Series 125, Economics, The Univeristy of Manchester. [Downloadable!]
Terence Tai-Leung Chong & Venus Liew & Yuanxiu Zhang & Chi-Leung Wong, 2006. "Estimation of the Autoregressive Order in the Presence of Measurement Errors," Economics Bulletin, Economics Bulletin, vol. 3(12), pages 1-10. [Downloadable!]

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