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Inference on Structural Breaks using Information Criteria

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  • Alastair R. Hall
  • Denise R. Osborn
  • Nikolaos Sakkas

Abstract

This paper investigates the usefulness of information criteria for inference on the number of structural breaks in a standard linear regression model. In particular, we propose a modified penalty function for such criteria based on theoretical arguments, which implies each break is equivalent to estimation of three individual regression coefficients. A Monte Carlo analysis compares information criteria to sequential testing, with the modified BIC and HQIC criteria performing well overall, for DGPs both without and with breaks. The methods are also used to examine changes in Euro area monetary policy between 1971 and 2007.
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Suggested Citation

  • Alastair R. Hall & Denise R. Osborn & Nikolaos Sakkas, 2013. "Inference on Structural Breaks using Information Criteria," Manchester School, University of Manchester, vol. 81, pages 54-81, October.
  • Handle: RePEc:bla:manchs:v:81:y:2013:i::p:54-81
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    File URL: http://hdl.handle.net/10.1111/manc.12017
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    1. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
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    8. 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, June.
    9. Stephen G. Cecchetti & Guy Debelle, 2006. "Has the inflation process changed?," Economic Policy, CEPR;CES;MSH, vol. 21(46), pages 311-352, April.
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    Citations

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    Cited by:

    1. Paraskevi Salamaliki, 2015. "Economic Policy Uncertainty and Economic Activity: A Focus on Infrequent Structural Shifts," Working Paper Series of the Department of Economics, University of Konstanz 2015-08, Department of Economics, University of Konstanz.
    2. repec:taf:emetrv:v:36:y:2017:i:6-9:p:667-698 is not listed on IDEAS
    3. repec:eee:phsmap:v:518:y:2019:i:c:p:331-342 is not listed on IDEAS
    4. Alaa Abi Morshed & Elena Andreou & Otilia Boldea, 2018. "Structural Break Tests Robust to Regression Misspecification," Econometrics, MDPI, Open Access Journal, vol. 6(2), pages 1-39, May.
    5. repec:eee:ecmode:v:74:y:2018:i:c:p:194-206 is not listed on IDEAS
    6. Eduard Baumöhl & Štefan Lyócsa, 2014. "Risk-Return Convergence in CEE Stock Markets: Structural Breaks and Market Volatility," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 64(5), pages 352-373, November.
    7. Bataa, Erdenebat & Izzeldin, Marwan & Osborn, Denise R., 2016. "Changes in the global oil market," Energy Economics, Elsevier, vol. 56(C), pages 161-176.
    8. repec:bla:obuest:v:79:y:2017:i:2:p:145-164 is not listed on IDEAS
    9. Alastair R. Hall & Denise R. Osborn & Nikolaos Sakkas, 2017. "The asymptotic behaviour of the residual sum of squares in models with multiple break points," Econometric Reviews, Taylor & Francis Journals, vol. 36(6-9), pages 667-698, October.
    10. Baumöhl, Eduard & Lyócsa, Štefan, 2014. "Volatility and dynamic conditional correlations of worldwide emerging and frontier markets," Economic Modelling, Elsevier, vol. 38(C), pages 175-183.

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