A New Test for Structural Change in Dynamic Models

Brett Inder and Hao Kang

No 267401, Department of Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: This paper considers the linear regression model with the lagged dependent variable as a regressor. It argues that the Dynamic CUSUM test may not be ideal in testing for a structural change at an unknown point in time. A new test is proposed, with critical values based on small disturbance asymptotics. A Monte Carlo study shows some power improvement. The new test also provides far more reliable estimates of the location of the structural break.

Keywords: Research; Methods/Statistical; Methods (search for similar items in EconPapers)
Pages: 23
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Persistent link: https://EconPapers.repec.org/RePEc:ags:monebs:267401

DOI: 10.22004/ag.econ.267401

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