Testing Parameter Constancy in Linear Models against Stochastic Stationary Parameters
This paper considers testing parameter constancy in linear models when the alternative is that a subset of the parameters follow a stationary vector autoregressive process of known finite order. This kind of a linear model is only identified under the alternative, which usually precludes finding a test statistic with an analytic nuyll distribution. In the present situation, however, it is still possible to derive a test statistic with an asymptotic chi-squared distribution under the null hypothesis and this is done in the paper. The small-sample properties of the test statistic are investigated by simulation and found satisfactory. The test retains its power when the alternative to parameter constancy is a random walk parameter process.
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|Date of creation:||May 1995|
|Publication status:||Published in Journal of Econometrics, 1999, pages 193-213.|
|Contact details of provider:|| Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden|
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