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Performance of Methods Determining Structural Break in Linear Regression Models

Author

Listed:
  • Zümre Özdemir Güler

    (Research Asistant of Econometrics, Karamanoðlu Mehmet Bey University, Karaman, TURKEY.)

  • Mehmet Akif Bakýr

    (Professor of Statistics, Gazi University, Ankara, TURKEY.)

Abstract

In the literature, although many studies are describing the structural break in the linear regression model with time-series data, studies investigating this issue with cross-sectional data are limited. In this study, the performance evaluation of some approaches used to determine the structural break in a linear regression equation based on cross-sectional data was performed. In this context, firstly, the structural break problem is defined. Then, the theoretical expositions of some well-known methods which determine the structural break are given. The methods which used to determine the structural breaks may show performance differences under the effect of some factors. The performances of selected methods were evaluated with a simulation study in the context of the difference of constant terms, the difference of slope coefficients, location of break-point, sample size and homogeneity of error variances. The results of the simulation showed that the performances become different in terms of some structural features from the suggested methods for determination of structural break.

Suggested Citation

  • Zümre Özdemir Güler & Mehmet Akif Bakýr, 2019. "Performance of Methods Determining Structural Break in Linear Regression Models," International Econometric Review (IER), Econometric Research Association, vol. 11(2), pages 70-83, September.
    • Handle: RePEc:erh:journl:v:11:y:2019:i:2:p:70-83
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    References listed on IDEAS

    as
    1. Maasoumi, Esfandiar & Zaman, Asad & Ahmed, Mumtaz, 2010. "Tests for structural change, aggregation, and homogeneity," Economic Modelling, Elsevier, vol. 27(6), pages 1382-1391, November.
    2. Hansen, Bruce E., 1992. "Testing for parameter instability in linear models," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 517-533, August.
    3. Sergei Antoshin & Mr. Andrew Berg & Mr. Marcos R Souto, 2008. "Testing for Structural Breaks in Small Samples," IMF Working Papers 2008/075, International Monetary Fund.
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    JEL classification:

    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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