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A New Test for Structural Change in Dynamic Models

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  • Inder, Brett
  • Kang, Hao

Abstract

This paper considers the linear regression model with the lagged dependent variable as a regressor. It argues that the Dynamic CUSUM test may not be ideal in testing for a structural change at an unknown point in time. A new test is proposed, with critical values based on small disturbance asymptotics. A Monte Carlo study shows some power improvement. The new test also provides far more reliable estimates of the location of the structural break.

Suggested Citation

  • Inder, Brett & Kang, Hao, "undated". "A New Test for Structural Change in Dynamic Models," Department of Econometrics and Business Statistics Working Papers 267401, Monash University, Department of Econometrics and Business Statistics.
    • Handle: RePEc:ags:monebs:267401
    DOI: 10.22004/ag.econ.267401
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