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Stopping Tests in the Sequential Estimation for Multiple Structural Breaks

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  • Giovanni Urga
  • Christian de Peretti

Abstract

In this paper, we propose the use of bootstrapping methods to obtain correct critical values for dating breaks. Following the procedure proposed in Banerjee, Lazarova and Urga (1998), we consider the case of estimating a system with two or more marginal processes and a conditional process. First, the location of the breaks in marginal models is estimated. Next, the marginal models are imposed on the conditional model to form a reduced form system. The conditional model with its own breaks is then estimated. The estimation of the break dates is sequential. Break dates are estimated via two alternative procedures: including estimated break dates one by one or splitting the sample. Inclusion of additional breaks or splitting samples are repeated until a criterion for stopping is satisfied. In this paper we propose bootstrap tests as criterion for stopping sequential search. This procedure allows to improve the estimators to avoid excessive bias and prove to be stable in the case of both stationary and non-stationary series. Finally, we illustrate the methods by modelling the money demand in United Kingdom

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File URL: http://repec.org/esLATM04/up.1266.1082425877.pdf
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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society 2004 Latin American Meetings with number 320.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:latm04:320

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Keywords: Structural Breaks; Sequential Testing; Bootstrap;

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References

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  1. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
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Cited by:
  1. Matteo Mogliani, 2010. "Residual-based tests for cointegration and multiple deterministic structural breaks: A Monte Carlo study," PSE Working Papers halshs-00564897, HAL.
  2. repec:hal:wpaper:halshs-00575107 is not listed on IDEAS
  3. Matteo Mogliani & Giovanni Urga & Carlos Winograd, 2009. "Monetary disorder and financial regimes - The demand for money in Argentina, 1900-2006," PSE Working Papers halshs-00575107, HAL.
  4. Banerjee, Anindya & Urga, Giovanni, 2005. "Modelling structural breaks, long memory and stock market volatility: an overview," Journal of Econometrics, Elsevier, vol. 129(1-2), pages 1-34.
  5. David Hendry & Jurgen A. Doornik & Felix Pretis, 2013. "Step-indicator Saturation," Economics Series Working Papers 658, University of Oxford, Department of Economics.

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