IDEAS home Printed from https://ideas.repec.org/a/jae/japmet/v20y2005i1p99-121.html
   My bibliography  Save this article

Monitoring structural change in dynamic econometric models

Author

Listed:
  • Kurt Hornik

    (Institut für Statistik und Mathematik, Wirtschaftsuniversität Wien, Austria)

  • Friedrich Leisch

    (Institut für Statistik & Wahrscheinlichkeitstheorie, Technische Universität Wien, Austria)

  • Christian Kleiber

    (Institut für Wirtschafts- und Sozialstatistik, Universität Dortmund, Germany)

  • Achim Zeileis

    (Institut für Statistik und Mathematik, Wirtschaftsuniversität Wien, Austria)

Abstract

The classical approach to testing for structural change employs retrospective tests using a historical data set of a given length. Here we consider a wide array of fluctuation-type tests in a monitoring situation-given a history period for which a regression relationship is known to be stable, we test whether incoming data are consistent with the previously established relationship. Procedures based on estimates of the regression coefficients are extended in three directions: we introduce (a) procedures based on OLS residuals, (b) rescaled statistics and (c) alternative asymptotic boundaries. Compared to the existing tests our extensions offer ease of computation, improved size in finite samples for dynamic models and better power against certain alternatives, respectively. We apply our methods to three data sets, German M1 money demand, US labour productivity and S&P 500 stock returns. Copyright © 2005 John Wiley & Sons, Ltd.

Suggested Citation

  • Kurt Hornik & Friedrich Leisch & Christian Kleiber & Achim Zeileis, 2005. "Monitoring structural change in dynamic econometric models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(1), pages 99-121.
  • Handle: RePEc:jae:japmet:v:20:y:2005:i:1:p:99-121
    DOI: 10.1002/jae.776
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1002/jae.776
    File Function: Link to full text; subscription required
    Download Restriction: no

    File URL: http://qed.econ.queensu.ca:80/jae/2005-v20.1/
    File Function: Supporting data files and programs
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Zeileis, Achim & Leisch, Friedrich & Hornik, Kurt & Kleiber, Christian, 2002. "strucchange: An R Package for Testing for Structural Change in Linear Regression Models," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 7(i02).
    2. repec:cup:etheor:v:11:y:1995:i:4:p:699-720 is not listed on IDEAS
    3. Jeff Racine & Rob Hyndman, 2002. "Using R to teach econometrics," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 17(2), pages 175-189.
    4. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-856, July.
    5. Hansen, Bruce E., 1992. "Testing for parameter instability in linear models," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 517-533, August.
    6. Achim Zeileis, 2004. "Alternative boundaries for CUSUM tests," Statistical Papers, Springer, vol. 45(1), pages 123-131, January.
    7. Hansen, Bruce E., 2000. "Testing for structural change in conditional models," Journal of Econometrics, Elsevier, vol. 97(1), pages 93-115, July.
    8. Andrews, Donald W K & Ploberger, Werner, 1994. "Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative," Econometrica, Econometric Society, vol. 62(6), pages 1383-1414, November.
    9. Kramer, Walter & Ploberger, Werner & Alt, Raimund, 1988. "Testing for Structural Change in Dynamic Models," Econometrica, Econometric Society, vol. 56(6), pages 1355-1369, November.
    10. Kuan, Chung-Ming & Chen, Mei-Yuan, 1994. "Implementing the fluctuation and moving-estimates tests in dynamic econometric models," Economics Letters, Elsevier, vol. 44(3), pages 235-239.
    11. Stock, James H & Watson, Mark W, 1996. "Evidence on Structural Instability in Macroeconomic Time Series Relations," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(1), pages 11-30, January.
    12. Ploberger, Werner & Kramer, Walter, 1992. "The CUSUM Test with OLS Residuals," Econometrica, Econometric Society, vol. 60(2), pages 271-285, March.
    13. Leisch, Friedrich & Hornik, Kurt & Kuan, Chung-Ming, 2000. "Monitoring Structural Changes With The Generalized Fluctuation Test," Econometric Theory, Cambridge University Press, vol. 16(06), pages 835-854, December.
    14. Chu, Chia-Shang James & Hornik, Kurt & Kuan, Chung-Ming, 1995. "The Moving-Estimates Test for Parameter Stability," Econometric Theory, Cambridge University Press, vol. 11(04), pages 699-720, August.
    15. Ploberger, Werner & Kramer, Walter & Kontrus, Karl, 1989. "A new test for structural stability in the linear regression model," Journal of Econometrics, Elsevier, vol. 40(2), pages 307-318, February.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jae:japmet:v:20:y:2005:i:1:p:99-121. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://www.interscience.wiley.com/jpages/0883-7252/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.