Asymptotic Distribution Theory for Break Point Estimators in Models Estimated via 2SLS

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Asymptotic Distribution Theory for Break Point Estimators in Models Estimated via 2SLS

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Hall, Alastair R.
Han, Sanggohn
Boldea, Otilia

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Abstract

In this paper, we present a limiting distribution theory for the break point estimator in a linear regression model estimated via Two Stage Least Squares under two different scenarios regarding the magnitude of the parameter change between regimes. First, we consider the case where the parameter change is of fixed magnitude; in this case the resulting distribution depends on distribution of the data and is not of much practical use for inference. Second, we consider the case where the magnitude of the parameter change shrinks with the sample size; in this case, the resulting distribution can be used to construct approximate large sample confidence intervals for the break point. The finite sample performance of these intervals are analyzed in a small simulation study and the intervals are illustrated via an application to the New Keynesian Phillips curve.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 9472.

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Date of creation: 04 Jul 2008
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Handle: RePEc:pra:mprapa:9472

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Find related papers by JEL classification:
C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing

This paper has been announced in the following NEP Reports:

NEP-ALL-2008-07-20 (All new papers)
NEP-ECM-2008-07-20 (Econometrics)

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Hall, Alastair R & Sen, Amit, 1999. "Structural Stability Testing in Models Estimated by Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(3), pages 335-48, July.
Chengsi Zhang & Denise R. Osborn & Dong Heon Kim, 2007. "The New Keynesian Phillips Curve: From Sticky Inflation to Sticky Prices," Discussion Paper Series 0715, Institute of Economic Research, Korea University. [Downloadable!]
Other versions:
- Chengsi Zhang & Denise R. Osborn & Dong Heon Kim, 2006. "The New Keynesian Phillips Curve: from Sticky Inflation to Sticky Prices," The School of Economics Discussion Paper Series 0631, Economics, The University of Manchester. [Downloadable!]
- Chengsi Zhang & Denise R. Osborn & Dong Heon Kim, 2006. "The New Keynesian Phillips Curve: from Sticky Inflation to Sticky Prices," Centre for Growth and Business Cycle Research Discussion Paper Series 78, Economics, The Univeristy of Manchester. [Downloadable!]
- Chengsi Zhang & Denise R. Osborn & Dong Heon Kim, 2008. "The New Keynesian Phillips Curve: From Sticky Inflation to Sticky Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(4), pages 667-699, 06. [Downloadable!] (restricted)
Hall, Alastair R. & Han, Sanggohn & Boldea, Otilia, 2008. "Inference regarding multiple structural changes in linear models estimated via two stage least squares," MPRA Paper 9251, University Library of Munich, Germany, revised 20 Jun 2008. [Downloadable!]
Andrews, Donald W K & Ploberger, Werner, 1994. "Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative," Econometrica, Econometric Society, vol. 62(6), pages 1383-1414, November. [Downloadable!] (restricted)
Other versions:
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Sowell, Fallaw, 1996. "Optimal Tests for Parameter Instability in the Generalized Method of Moments Framework," Econometrica, Econometric Society, vol. 64(5), pages 1085-1107, September. [Downloadable!] (restricted)
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Andrews, Donald W. K. & Fair, Ray C., 1987. "Inference in Econometric Models with Structural Change," Working Papers 636, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
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- Donald W.K. Andrews & Ray C. Fair, 1987. "Inference in Econometric Models with Structural Change," Cowles Foundation Discussion Papers 832, Cowles Foundation, Yale University. [Downloadable!]
Ghysels, Eric & Hall, Alastair, 1990. "Are consumption-based intertemporal capital asset pricing models structural?," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 121-139. [Downloadable!] (restricted)
Bhattacharya, P.K., 1987. "Maximum likelihood estimation of a change-point in the distribution of independent random variables: General multiparameter case," Journal of Multivariate Analysis, Elsevier, vol. 23(2), pages 183-208, December. [Downloadable!] (restricted)
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:
- Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Universite de Montreal, Departement de sciences economiques. [Downloadable!]
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:
- Donald W.K. Andrews, 1990. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Cowles Foundation Discussion Papers 943, Cowles Foundation, Yale University. [Downloadable!]

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