Multivariate Methods for Monitoring Structural Change
Detection of structural change is a critical empirical activity, but continuous 'monitoring' of series, for structural changes in real time, raises well-known econometric issues that have been explored in a single series context. If multiple series co-break then it is possible that simultaneous examination of a set of series helps identify changes with higher probability or more rapidly than when series are examined on a case-by-case basis. Some asymptotic theory is developed for maximum and average CUSUM detection tests. Monte Carlo experiments suggest that these both provide an improvement in detection relative to a univariate detector over a wide range of experimental parameters, given a sufficiently large number of co-breaking series. This is robust to a cross-sectional correlation in the errors (a factor structure) and heterogeneity in the break dates. We apply the test to a panel of UK price indices.
|Date of creation:||Feb 2010|
|Date of revision:|
|Contact details of provider:|| Postal: London E1 4NS|
Phone: +44 (0) 20 7882 5096
Fax: +44 (0) 20 8983 3580
Web page: http://www.econ.qmul.ac.uk
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Zeileis, Achim & Leisch, Friedrich & Kleiber, Christian & Hornik, Kurt, 2002. "Monitoring structural change in dynamic econometric models," Technical Reports 2002,07, Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen.
- Michael P. Clements & David F. Hendry, 2001. "Forecasting Non-Stationary Economic Time Series," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262531895.
- Clements,Michael & Hendry,David, 1998.
"Forecasting Economic Time Series,"
Cambridge University Press, number 9780521634809, June.
- Andrews, Donald W K, 1993.
"Tests for Parameter Instability and Structural Change with Unknown Change Point,"
Econometric Society, vol. 61(4), pages 821-56, July.
- Donald W.K. Andrews, 1990. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Cowles Foundation Discussion Papers 943, Cowles Foundation for Research in Economics, Yale University.
- Jushan Bai & Pierre Perron, 1998.
"Estimating and Testing Linear Models with Multiple Structural Changes,"
Econometric Society, vol. 66(1), pages 47-78, January.
- Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Universite de Montreal, Departement de sciences economiques.
- Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- James H. Stock & Mark W. Watson, 1994.
"Evidence on Structural Instability in Macroeconomic Time Series Relations,"
NBER Technical Working Papers
0164, National Bureau of Economic Research, Inc.
- 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.
- James H. Stock & Mark W. Watson, 1994. "Evidence on structural instability in macroeconomic times series relations," Working Paper Series, Macroeconomic Issues 94-13, Federal Reserve Bank of Chicago.
- Kramer, Walter & Ploberger, Werner & Alt, Raimund, 1988. "Testing for Structural Change in Dynamic Models," Econometrica, Econometric Society, vol. 56(6), pages 1355-69, November.
- Hendry, David F., 2000. "On detectable and non-detectable structural change," Structural Change and Economic Dynamics, Elsevier, vol. 11(1-2), pages 45-65, July.
- Achim Zeileis, 2005. "A Unified Approach to Structural Change Tests Based on ML Scores, F Statistics, and OLS Residuals," Econometric Reviews, Taylor & Francis Journals, vol. 24(4), pages 445-466.
- Jushan Bai & Robin L. Lumsdaine & James H. Stock, 1998. "Testing For and Dating Common Breaks in Multivariate Time Series," Review of Economic Studies, Oxford University Press, vol. 65(3), pages 395-432.
- George Kapetanios, 2007. "Dynamic factor extraction of cross-sectional dependence in panel unit root tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 313-338.
- Davidson, James, 1994. "Stochastic Limit Theory: An Introduction for Econometricians," OUP Catalogue, Oxford University Press, number 9780198774037.
- Clements, Michael P & Hendry, David F, 1996. "Intercept Corrections and Structural Change," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(5), pages 475-94, Sept.-Oct.
- Groen, Jan J.J. & Kapetanios, George & Price, Simon, 2009. "A real time evaluation of Bank of England forecasts of inflation and growth," International Journal of Forecasting, Elsevier, vol. 25(1), pages 74-80.
- Achim Zeileis & Kurt Hornik, 2007. "Generalized M-fluctuation tests for parameter instability," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, vol. 61(4), pages 488-508.
- Chu, Chia-Shang James & Stinchcombe, Maxwell & White, Halbert, 1996. "Monitoring Structural Change," Econometrica, Econometric Society, vol. 64(5), pages 1045-65, September.
When requesting a correction, please mention this item's handle: RePEc:qmw:qmwecw:wp658. 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: (Nick Vriend)
If references are entirely missing, you can add them using this form.