 Using OLS to Estimate and Test for Structural Changes in Models with Endogenous RegressorsPierre Perron and Yohei Yamamoto No WP2011-053, Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics Abstract: We consider the problem of estimating and testing for multiple breaks in a single equation framework with regressors that are endogenous, i.e., correlated with the errors. We show that even in the presence of endogenous regressors, it is still preferable to simply estimate the break dates and test for structural change using the usual ordinary least-squares (OLS) framework. In most cases, it delivers estimates of the break dates with higher precision and tests with higher power compared to those obtained using an IV method. Also, the OLS method avoids potential weak identification problems caused by weak instruments. To illustrate the relevance of our theoretical results, we consider the stability of the New Keynesian hybrid Phillips curve. IV-based methods only provide weak evidence of instability. On the other hand, OLS-based ones strongly indicate a change in 1991:1 and that after this date the model looses all explanatory power. Keywords: structural change; instrument variables; parameter variations; Phillips Curve. (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bos:wpaper:wp2011-053 Access Statistics for this paper More papers in Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.