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Step-indicator Saturation

  • David Hendry
  • Jurgen A. Doornik
  • Felix Pretis

Using an extension of general-to-specific modelling, based on the recent developments of impulse-indicator saturation (IIS), we consider selecting significant step indicators from a saturating set to capture location shifts.� The approximate non-centrality of the test is derived for a variety of shifts using a 'split-half' analysis, the simplest specialization of a multiple-block search algorithm.� Monte Carlo simulations confirm the accuracy of the nominal significance levels under the null, and show rejections when location shifts occur, improving in non-null rejection frequency compared to the corresponding IIS-based and to Chow (1960) tests.

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File URL: http://www.economics.ox.ac.uk/materials/papers/12760/paper658.pdf
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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 658.

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Date of creation: 06 Jun 2013
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Handle: RePEc:oxf:wpaper:658
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  1. Carlos Santos & David Hendry & Soren Johansen, 2008. "Automatic selection of indicators in a fully saturated regression," Computational Statistics, Springer, vol. 23(2), pages 317-335, April.
  2. Giovanni Urga & Christian de Peretti, 2004. "Stopping Tests in the Sequential Estimation for Multiple Structural Breaks," Econometric Society 2004 Latin American Meetings 320, Econometric Society.
  3. Castle Jennifer L. & Doornik Jurgen A & Hendry David F., 2011. "Evaluating Automatic Model Selection," Journal of Time Series Econometrics, De Gruyter, vol. 3(1), pages 1-33, February.
  4. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
  5. David F. Hendry & Carlos Santos, 2005. "Regression Models with Data-based Indicator Variables," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(5), pages 571-595, October.
  6. Hendry David F & Mizon Grayham E, 2011. "Econometric Modelling of Time Series with Outlying Observations," Journal of Time Series Econometrics, De Gruyter, vol. 3(1), pages 1-26, February.
  7. Castle, Jennifer L. & Doornik, Jurgen A. & Hendry, David F., 2012. "Model selection when there are multiple breaks," Journal of Econometrics, Elsevier, vol. 169(2), pages 239-246.
  8. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
  9. David Hendry & Carlos Santos, 2010. "An Automatic Test of Super Exogeneity," Economics Series Working Papers 476, University of Oxford, Department of Economics.
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