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Monotonicity in estimating multiple structural breaks

Author

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  • Xia, Siyuan
  • Qian, Junhui

Abstract

We propose a monotonicity property for methods of estimating multiple structural breaks in linear regressions. A procedure with such a property yields a sequence of monotonically increasing sets of estimated break dates. Due to the uncertainty about the true number of breaks in finite samples, a monotone procedure offers a ranking of breaks from the least uncertain to the most. We propose a new method that imposes monotonicity. Monte Carlo simulations show that the proposed procedure works well in finite samples. We also apply the procedure to a study of the structural changes in the Fed’s monetary policy.

Suggested Citation

  • Xia, Siyuan & Qian, Junhui, 2025. "Monotonicity in estimating multiple structural breaks," Economics Letters, Elsevier, vol. 257(C).
    • Handle: RePEc:eee:ecolet:v:257:y:2025:i:c:s0165176525005440
    DOI: 10.1016/j.econlet.2025.112707
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    References listed on IDEAS

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    1. Qian, Junhui & Su, Liangjun, 2016. "Shrinkage Estimation Of Regression Models With Multiple Structural Changes," Econometric Theory, Cambridge University Press, vol. 32(6), pages 1376-1433, December.
    2. Harchaoui, Z. & Lévy-Leduc, C., 2010. "Multiple Change-Point Estimation With a Total Variation Penalty," Journal of the American Statistical Association, American Statistical Association, vol. 105(492), pages 1480-1493.
    3. Bai, Jushan, 1997. "Estimating Multiple Breaks One at a Time," Econometric Theory, Cambridge University Press, vol. 13(3), pages 315-352, June.
    4. 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.
    5. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    6. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
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    Keywords

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    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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