Local Fourier tests for structural change based on residuals

Jaehee Kim and Geung-Hee Lee

Communications in Statistics - Theory and Methods, 2017, vol. 46, issue 1, 133-147

Abstract: We propose a structural change test based on the recursive residuals with the local Fourier series estimators. The statistical properties of the proposed test are derived and the empirical properties are shown via simulation. We also consider other structural change tests based on CUSUM, MOSUM, moving estimates (ME), and empirical distribution functions with the recursive residuals and the ordinary residuals. Empirical powers are calculated in various structural change models for the comparison of those tests. These structural change tests are applied to South Korea's gross domestic product (GDP), South Korean Won to US Dollar currency exchange rates, and South Korea's Okun's law.

Date: 2017
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DOI: 10.1080/03610926.2014.988259

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