Testing for Common Breaks in a Multiple Equations System

Pierre Perron and Tatsushi Oka

No WP2011-057, Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics

Abstract: The issue addressed in this paper is that of testing for common breaks across or within equations. Our framework is very general and allows integrated regressors and trends as well as stationary regressors. The null hypothesis is that some subsets of the parameters (either regression coecients or elements of the covariance matrix of the errors) share one or more common break dates, with the break dates in the system asymptotically distinct so that each regime is separated by some positive fraction of the sample size. Under the alternative hypothesis, the break dates are not the same and also need not be separated by a positive fraction of the sample size. The test con- sidered is the quasi-likelihood ratio test assuming normal errors, though as usual the limit distribution of the test remains valid with non-normal errors. Also of indepen- dent interest, we provide results about the consistency and rate of convergence when searching over all possible partitions subject only to the requirement that each regime contains at least as many observations as the number of parameters in the model. Sim- ulation results show that the test has good nite sample properties. We also provide an application to various measures of in ation to illustrate its usefulness.

Keywords: change-point; segmented regressions; break dates; hypothesis testing; model selection; system of regressions. (search for similar items in EconPapers)
Pages: 64 pages
Date: 2011-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Testing for common breaks in a multiple equations system (2018)
Working Paper: Testing for Common Breaks in a Multiple Equations System (2018)
Working Paper: Testing for common breaks in a multiple equations system (2018)
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