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Structural Breaks - An Instrumental Variable Approach

Author

Listed:
  • Conniffe, Denis

    (University College Dublin)

  • Kelly, Robert

    (Central Bank of Ireland)

Abstract

A structural change test and corresponding change estimator of an instrumental variable nature are proposed. The strengths of the approach lie in its ease of application and the strong test power. It does not suffer from critical value adjustments required by the CUSUM type tests and is unique in that it tests and measures the size of the break in one operation. The power of this test is compared to others in the literature, both algebraically and through simulations, with favourable results.

Suggested Citation

  • Conniffe, Denis & Kelly, Robert, 2011. "Structural Breaks - An Instrumental Variable Approach," Research Technical Papers 4/RT/11, Central Bank of Ireland.
  • Handle: RePEc:cbi:wpaper:4/rt/11
    as

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    File URL: https://centralbank.ie/docs/default-source/publications/research-technical-papers/research-technical-paper-04rt11.pdf?sfvrsn=8
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    References listed on IDEAS

    as
    1. Filippo Altissimo & Valentina Corradi, 2000. "Strong Rules for Detecting the Number of Breaks in a Time Series," Econometric Society World Congress 2000 Contributed Papers 0574, Econometric Society.
    2. Ploberger, Werner & Kramer, Walter, 1992. "The CUSUM Test with OLS Residuals," Econometrica, Econometric Society, vol. 60(2), pages 271-285, March.
    3. Farley, John U. & Hinich, Melvin & McGuire, Timothy W., 1975. "Some comparisons of tests for a shift in the slopes of a multivariate linear time series model," Journal of Econometrics, Elsevier, vol. 3(3), pages 297-318, August.
    4. Denis Conniffe & John E. Spencer, 1999. "Approximating the Distribution of the Maximum Partial Sum of Normal Deviates," Papers WP102, Economic and Social Research Institute (ESRI).
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Structural Break Test; Structural Break Estimation; Instrumental Variable;

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General

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