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Step-indicator Saturation

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  • David Hendry
  • Jurgen A. Doornik
  • Felix Pretis

Abstract

Using an extension of general-to-specific modelling, based on the recent developments of impulse-indicator saturation (IIS), we consider selecting significant step indicators from a saturating set to capture location shifts.� The approximate non-centrality of the test is derived for a variety of shifts using a 'split-half' analysis, the simplest specialization of a multiple-block search algorithm.� Monte Carlo simulations confirm the accuracy of the nominal significance levels under the null, and show rejections when location shifts occur, improving in non-null rejection frequency compared to the corresponding IIS-based and to Chow (1960) tests.

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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 658.

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Date of creation: 06 Jun 2013
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Handle: RePEc:oxf:wpaper:658

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Keywords: General-so-specific; step-indicator saturation; test power; location shifts; model section; Autometrics;

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  1. Castle Jennifer L. & Doornik Jurgen A & Hendry David F., 2011. "Evaluating Automatic Model Selection," Journal of Time Series Econometrics, De Gruyter, De Gruyter, vol. 3(1), pages 1-33, February.
  2. David Hendry & Carlos Santos, 2003. "Regression Models with Data-based Indicator Variables," Economics Series Working Papers 2004-W04, University of Oxford, Department of Economics.
  3. David Hendry & Søren Johansen & Carlos Santos, 2008. "Automatic selection of indicators in a fully saturated regression," Computational Statistics, Springer, Springer, vol. 23(2), pages 337-339, April.
  4. Hendry David F & Mizon Grayham E, 2011. "Econometric Modelling of Time Series with Outlying Observations," Journal of Time Series Econometrics, De Gruyter, De Gruyter, vol. 3(1), pages 1-26, February.
  5. BAI, Jushan & PERRON, Pierre, 1998. "Computation and Analysis of Multiple Structural-Change Models," Cahiers de recherche, Universite de Montreal, Departement de sciences economiques 9807, Universite de Montreal, Departement de sciences economiques.
  6. Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche, Universite de Montreal, Departement de sciences economiques 9552, Universite de Montreal, Departement de sciences economiques.
  7. David Hendry & Carlos Santos, 2010. "An Automatic Test of Super Exogeneity," Economics Series Working Papers 476, University of Oxford, Department of Economics.
  8. Jennifer Castle & David Hendry & Jurgen A. Doornik, 2008. "Model Selection when there are Multiple Breaks," Economics Series Working Papers 407, University of Oxford, Department of Economics.
  9. Giovanni Urga & Christian de Peretti, 2004. "Stopping Tests in the Sequential Estimation for Multiple Structural Breaks," Econometric Society 2004 Latin American Meetings, Econometric Society 320, Econometric Society.
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Cited by:
  1. David Hendry & Jennifer L. Castle, 2010. "Model Selection in Under-specified Equations Facing Breaks," Economics Series Working Papers 509, University of Oxford, Department of Economics.

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