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Determining the number of breaks in a piecewise linear regression model

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Author Info
Strikholm, Birgit () (Dept. of Economic Statistics, Stockholm School of Economics)

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Abstract

In this paper we propose a sequential method for determining the number of breaks in piecewise linear structural break models. An advantage of the method is that it is based on standard statistical inference. Tests available for testing linearity against switching regression type nonlinearity are applied sequentially to determine the number of regimes in the structural break model. A simulation study is performed in order to investigate the finite-sample behaviour of the procedure and to compare it with other alternatives. We find that our method works well in comparison for both single and multiple break cases.

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Publisher Info
Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 648.

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Length: 30 pages
Date of creation: 13 Dec 2006
Date of revision:
Handle: RePEc:hhs:hastef:0648

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Related research
Keywords: Model specification; multiple structural breaks.;

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Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

References listed on IDEAS
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  1. Timo Terasvirta & Andrés González, 2006. "Modelling autoregressive processes with a shifting mean," BORRADORES DE ECONOMIA 003230, BANCO DE LA REPÚBLICA. [Downloadable!]
    Other versions:
  2. Bai, Jushan, 1997. "Estimating Multiple Breaks One at a Time," Econometric Theory, Cambridge University Press, vol. 13(03), pages 315-352, June. [Downloadable!]
    Other versions:
  3. Yao, Yi-Ching, 1988. "Estimating the number of change-points via Schwarz' criterion," Statistics & Probability Letters, Elsevier, vol. 6(3), pages 181-189, February. [Downloadable!] (restricted)
  4. Jushan Bai & Pierre Perron, 2003. "Critical values for multiple structural change tests," Econometrics Journal, Royal Economic Society, vol. 6(1), pages 72-78, 06. [Downloadable!] (restricted)
  5. Eitrheim, Oyvind & Terasvirta, Timo, 1996. "Testing the adequacy of smooth transition autoregressive models," Journal of Econometrics, Elsevier, vol. 74(1), pages 59-75, September. [Downloadable!] (restricted)
    Other versions:
  6. Lin, Chien-Fu Jeff & Terasvirta, Timo, 1994. "Testing the constancy of regression parameters against continuous structural change," Journal of Econometrics, Elsevier, vol. 62(2), pages 211-228, June. [Downloadable!] (restricted)
    Other versions:
  7. Bai, Jushan & Lumsdaine, Robin L & Stock, James H, 1998. "Testing for and Dating Common Breaks in Multivariate Time Series," Review of Economic Studies, Blackwell Publishing, vol. 65(3), pages 395-432, July. [Downloadable!] (restricted)
  8. Mohamed Safouane Ben Aïssa & Mohamed Boutahar & Jamel Jouini, 2004. "Bai and Perron's and spectral density methods for structural change detection in the US inflation process," Applied Economics Letters, Taylor and Francis Journals, vol. 11(2), pages 109-115, February. [Downloadable!] (restricted)
  9. repec:cup:etheor:v:13:y:1997:i:3:p:315-52 is not listed on IDEAS
  10. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22. [Downloadable!]
    Other versions:
  11. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    Other versions:
  12. Strikholm, Birgit & Teräsvirta, Timo, 2005. "Determining the Number of Regimes in a Threshold Autoregressive Model Using Smooth Transition Autoregressions," Working Paper Series in Economics and Finance 578, Stockholm School of Economics, revised 11 Feb 2005. [Downloadable!]
  13. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-56, July. [Downloadable!] (restricted)
    Other versions:
  14. Bai, Jushan, 1999. "Likelihood ratio tests for multiple structural changes," Journal of Econometrics, Elsevier, vol. 91(2), pages 299-323, August. [Downloadable!] (restricted)
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