Advanced Search
MyIDEAS: Login to save this paper or follow this series

Testing Parameter Stability: A Wild Bootstrap Approach

Contents:

Author Info

  • O'Reilly, Gerard

    (Central Bank and Financial Services Authority of Ireland)

  • Whelan, Karl

    (Central Bank and Financial Services Authority of Ireland)

Abstract

Unknown-breakpoint tests for possible structural change have become standard in recent years, with the most popular being the so-called Sup-F tests, whose asymptotic distribution was derived by Andrews (1993). We highlight two problems that lead to poor performance when testing for structural breaks in dynamic time series models using the Andrews critical values: High persistence of explanatory variables and heteroskedasticity. We propose a so-called ``wild bootstrap'' approach to generating critical values for the Sup-F statistic and report that this approach performs well across a wide variety of possible data generating processes, including those with large coefficients on lagged dependent variables and heteroskedasticity.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.centralbank.ie/publications/documents/8RT05.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Central Bank of Ireland in its series Research Technical Papers with number 8/RT/05.

as in new window
Length: 29 pages
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:cbi:wpaper:8/rt/05

Contact details of provider:
Postal: P.O. Box No. 559, Dame Street, Dublin 2
Phone: (01) 671 6666
Fax: (01) 671 6561
Email:
Web page: http://www.centralbank.ie
More information through EDIRC

Related research

Keywords:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Andrew Levin & Jeremy Piger, 2003. "Is Inflation Persistence Intrinsic in Industrial Economies?," Computing in Economics and Finance 2003, Society for Computational Economics 298, Society for Computational Economics.
  2. Russell Davidson & Emmanuel Flachaire, 2000. "The Wild Bootstrap, Tamed at Last," Econometric Society World Congress 2000 Contributed Papers, Econometric Society 1413, Econometric Society.
  3. Fagan, Gabriel & Henry, Jérôme & Mestre, Ricardo, 2001. "An area-wide model (AWM) for the euro area," Working Paper Series, European Central Bank 0042, European Central Bank.
  4. Stock, James H., 1991. "Confidence intervals for the largest autoregressive root in U.S. macroeconomic time series," Journal of Monetary Economics, Elsevier, Elsevier, vol. 28(3), pages 435-459, December.
  5. Hansen,B.E., 1998. "The grid bootstrap and the autoregressive model," Working papers, Wisconsin Madison - Social Systems 26, Wisconsin Madison - Social Systems.
  6. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, Econometric Society, vol. 61(4), pages 821-56, July.
  7. Hansen, Bruce E., 2000. "Testing for structural change in conditional models," Journal of Econometrics, Elsevier, Elsevier, vol. 97(1), pages 93-115, July.
  8. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 1(1), pages 19-46, January.
  9. Donald W.K. Andrews & Werner Ploberger, 1992. "Optimal Tests When a Nuisance Parameter Is Present Only Under the Alternative," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1015, Cowles Foundation for Research in Economics, Yale University.
  10. Gadzinski, Gregory & Orlandi, Fabrice, 2004. "Inflation persistence in the European Union, the euro area, and the United States," Working Paper Series, European Central Bank 0414, European Central Bank.
  11. Margaret McConnell & Gabriel Perez Quiros, 2000. "Output fluctuations in the United States: what has changed since the early 1980s?," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Mar.
  12. Godfrey, L.G. & Tremayne, A.R., 2005. "The wild bootstrap and heteroskedasticity-robust tests for serial correlation in dynamic regression models," Computational Statistics & Data Analysis, Elsevier, Elsevier, vol. 49(2), pages 377-395, April.
  13. Lawrence J. Christiano, 1988. "Searching For a Break in GNP," NBER Working Papers 2695, National Bureau of Economic Research, Inc.
  14. Todd E. Clark, 2006. "Disaggregate evidence on the persistence of consumer price inflation," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 21(5), pages 563-587.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Peter Tillmann, 2010. "The changing nature of inflation persistence in Switzerland," Empirica, Springer, Springer, vol. 37(4), pages 445-453, November.
  2. Stefan Gerlach & Peter Tillmann, 2011. "Inflation Targeting and Inflation Persistence in Asia-Pacific," Working Papers, Hong Kong Institute for Monetary Research 252011, Hong Kong Institute for Monetary Research.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cbi:wpaper:8/rt/05. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Richard Smith).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.