Testing for Structural Change in Heterogeneous Panels with an Application to the Euro's Trade Effect

Laurent Pauwels, Felix Chan and Mancini Griffoli Tommaso
Additional contact information
Mancini Griffoli Tommaso: Swiss National Bank

Journal of Time Series Econometrics, 2012, vol. 4, issue 2, 35

Abstract: This paper presents a structural change test for panel data models in which the break (or the change) affects some, but not all, cross-section units in the panel. The test is robust to non-normal, heteroskedastic and autocorrelated errors, as well as end-of-sample structural change. The test amounts to computing and comparing pre- and post-break sample statistics as Chow (1960) type F statistics averaged over cross-section units. The cases of known and unknown break date are both considered. Under mild assumptions, the test has a limiting standard normal distribution as the number of cross-sections tends to infinity. Monte Carlo experiments show that the test has good size and power under a wide range of circumstances, including when the break date is unknown and differs across individual units, and when errors exhibit cross-section dependence. Finally, the test is illustrated by seeking a break in the dynamics of trade among euro area countries following the introduction of the euro.

Keywords: structural break; parameter stability; cross-section dependence; common correlated effects; gravity model; euro effect on trade (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
https://doi.org/10.1515/1941-1928.1141 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:jtsmet:v:4:y:2012:i:2:n:3

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/jtse/html

DOI: 10.1515/1941-1928.1141

Access Statistics for this article

Journal of Time Series Econometrics is currently edited by Javier Hidalgo

More articles in Journal of Time Series Econometrics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().