Chapter

Testing parameter constancy

Timo Teräsvirta, Dag Tjøstheim and W. J. Granger

in Modelling Nonlinear Economic Time Series

Published in print December 2010 | ISBN: 9780199587148
Published online May 2011 | e-ISBN: 9780191595387 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199587148.003.0006

Series: Advanced Texts in Econometrics

Testing parameter constancy

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This chapter begins by a introducing the well known Chow test of a single structural break in a linear model. The more general case in which the break‐point is assumed unknown is discussed next. This case involves an identification problem similar to that treated in Chapter 5. Lagrange multiplier tests designed for discovering not only breaks but smooth shifts in parameters receive attention, and the discussion is extended to vector models as well. Tests building on recursive estimation of parameters of the (linear) model are considered as well as tests of parameter constancy against stochastically varying parameters.

Keywords: Chow test; CUSUM test; Nyblom test; parameter constancy; recursive estimation; stochastic parameter model; structural break; time‐varying parameter model

Chapter.  10594 words. 

Subjects: Econometrics and Mathematical Economics

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