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Tests for Deterministic Parametric Structural Change in Regression Models

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  • George Kapetanios

    ()
    (Queen Mary, University of London)

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    Abstract

    The problem of structural change justifiably attracts considerable attention in econometrics. A number of different paradigms have been adopted ranging from structural breaks which are sudden and rare to time-varying coefficient models which exhibit structural change more frequently and continuously. This paper is concerned with parametric econometric models whose coefficients change deterministically and smoothly over time. In particular we provide and discuss tests for the null hypothesis of no structural change versus the alternative hypothesis of smooth deterministic structural change. We provide asymptotic tests for this null hypothesis. However, the finite sample performance of these tests is not good as they overreject significantly. To address this problem we propose and justify bootstrap based tests. These tests perform well in an extensive Monte Carlo study.

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    File URL: http://www.econ.qmul.ac.uk/papers/doc/wp539.pdf
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    Bibliographic Info

    Paper provided by Queen Mary, University of London, School of Economics and Finance in its series Working Papers with number 539.

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    Date of creation: May 2005
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    Handle: RePEc:qmw:qmwecw:wp539

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    Related research

    Keywords: Structural change; Non-stationarity; Deterministic time-variation;

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    1. repec:wop:humbsf:1995-63 is not listed on IDEAS
    2. Orbe, Susan & Ferreira, Eva & Rodriguez-Poo, Juan, 2005. "Nonparametric estimation of time varying parameters under shape restrictions," Journal of Econometrics, Elsevier, vol. 126(1), pages 53-77, May.
    3. Olivier SCAILLET, 2001. "Density Estimation Using Inverse and Reciprocal Inverse Guassian Kernels," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2001017, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    4. J. L. Horowitz, 1995. "Bootstrap Methods In Econometrics: Theory And Numerical Performance," SFB 373 Discussion Papers 1995,63, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
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