Computation and Analysis of Multiple Structural-Change Models

Jushan Bai and Pierre Perron

Cahiers de recherche from Universite de Montreal, Departement de sciences economiques

Abstract: In a recent paper, Bai and Perron (1998) considered theoretical issues related to the limiting distribution of estimators and test statistics in the linear model with multiple structural changes. In this companion paper, we consider practical issues for the empirical applications of the procedures. We first address the problem of estimation of the break dates and present an efficient algorithm to obtain global minimizers of the sum of squared residuals. This algorithm is based on the principle of dynamic programming and requires at most least-squares operations of order O(T 2) for any number of breaks. Our method can be applied to both pure and partial structural-change models. Secondly, we consider the problem of forming confidence intervals for the break dates under various hypotheses about the structure of the data and the errors across segments. Third, we address the issue of testing for structural changes under very general conditions on the data and the errors. Fourth, we address the issue of estimating the number of breaks. We present simulation results pertaining to the behavior of the estimators and tests in finite samples. Finally, a few empirical applications are presented to illustrate the usefulness of the procedures. All methods discussed are implemented in a GAUSS program available upon request for non-profit academic use.

Keywords: dynamic ogramming; rtial structural change; hythesis testing; multie regimes; breaks; model selection; regression model (search for similar items in EconPapers)
JEL-codes: C20 C60 C62 (search for similar items in EconPapers)
Pages: 59 pages
Date: 1998
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (61)

Downloads: (external link)
http://hdl.handle.net/1866/457 (application/pdf)

Related works:
Journal Article: Computation and analysis of multiple structural change models (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mtl:montde:9807

Access Statistics for this paper

More papers in Cahiers de recherche from Universite de Montreal, Departement de sciences economiques Contact information at EDIRC.
Bibliographic data for series maintained by Sharon BREWER ().