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Structural Change Tests for Simulated Method of Moments

Eric Guysels () and Alain Guay ()
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Eric Guysels: Pennsylvania State University

No 61, Cahiers de recherche CREFE / CREFE Working Papers from CREFE, Université du Québec à Montréal

Abstract: Simulation-based estimation methods have become more widely used in recent years. We propose a set of tests for structural change in models estimates via Simulated Method of Moments (see Duffie and Singleton (1993)). These tests extend the recent work of Andrews (1993) and Sowell (1996a, b) which covered Generalized Method of Moments estimators not involving simulation. We derive the asymptotic distributions of various tests. We show that the number of simulations does not affect the asymptotic distribution nor the asymptotic local power of tests for structural change. A Monte Carlo investigation of the finite sample size and power reveals, however, that simulation uncertainty does affect the properties of tests. Nevertheless, even a relatively small number of simulations suffices to obtain tests with desirable small sample size and power properties. Les méthodes simulées d'estimation sont de plus en plus utilisées pour l'estimation et l'évaluation des modèles struturels. Dans cette étude, nous introduisons un ensemble de tests de stabilité pour les modèles estimés à l'aide de la méthode des moments simulés (voir Duffie et Singleton (1993)). Ces tests sont basés sur les travaux récents, dans le cadre de la méthode des moments généralisés, de Andrews (1993) et Sowell (1996a, b). Nous obtenons la loi asymptotique de ces tests et nous montrons que cette loi ainsi que la puissance locale asymptotique ne dépendent pas du nombre de simulations. Une étude de Monte-Carlo révèle qu'en petit échantillon le nombre de simulations influence le niveau et la puissance des tests. Cependant, un nombre restreint de simulations semble suffisant pour obtenir des bonnes propriétés de petit échantillon.

Keywords: Simulated method of moments; Structural stability testing; Optimal tests. (search for similar items in EconPapers)
JEL-codes: C1 C12 C22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm
Date: 1998-06
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Related works:
Journal Article: Structural change tests for simulated method of moments (2003) Downloads
Working Paper: Structural Change Tests for Simulated Method of Moments (1998) Downloads
Working Paper: Structural Change Tests for Simulated Method of Moments (1998) Downloads
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