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Bootstrapping structural change tests

Author

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  • Boldea, Otilia
  • Cornea-Madeira, Adriana
  • Hall, Alastair R.

Abstract

This paper demonstrates the asymptotic validity of methods based on the wild recursive and wild fixed bootstraps for testing hypotheses about discrete parameter change in linear models estimated via Two Stage Least Squares. The framework allows for the errors to exhibit conditional and/or unconditional heteroscedasticity, and for the reduced form to be unstable. Simulation evidence indicates the bootstrap tests yield reliable inferences in the sample sizes often encountered in macroeconomics. If the errors exhibit unconditional heteroscedasticity and/or the reduced form is unstable then the bootstrap methods are particularly attractive because the limiting distributions of the test statistics are not pivotal.

Suggested Citation

  • Boldea, Otilia & Cornea-Madeira, Adriana & Hall, Alastair R., 2019. "Bootstrapping structural change tests," Journal of Econometrics, Elsevier, vol. 213(2), pages 359-397.
    • Handle: RePEc:eee:econom:v:213:y:2019:i:2:p:359-397
    DOI: 10.1016/j.jeconom.2019.05.019
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    Cited by:

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    2. Rothfelder, Mario & Boldea, Otilia, 2016. "Testing for a Threshold in Models with Endogenous Regressors," Discussion Paper 2016-029, Tilburg University, Center for Economic Research.
    3. Christis Katsouris, 2023. "Predictability Tests Robust against Parameter Instability," Papers 2307.15151, arXiv.org.
    4. Daiki Maki & Yasushi Ota, 2019. "Testing for time-varying properties under misspecified conditional mean and variance," Papers 1907.12107, arXiv.org, revised Aug 2019.
    5. Bertille Antoine & Otilia Boldea & Niccolo Zaccaria, 2024. "Efficient two-sample instrumental variable estimators with change points and near-weak identification," Papers 2406.17056, arXiv.org.

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    More about this item

    Keywords

    Multiple break points; Instrumental variables estimation; Two-Stage Least Squares; Wild bootstrap; Heteroskedasticity;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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