Version 2 2019-04-25, 06:35Version 2 2019-04-25, 06:35
Version 1 2019-04-22, 04:45Version 1 2019-04-22, 04:45
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posted on 2019-04-25, 06:35authored byDaisuke Yamazaki
It is known that several widely used structural change tests have non-monotonic power because the long-run variance is poorly estimated under the alternative hypothesis. In this paper, we propose a modified long-run variance estimator to alleviate this problem. We theoretically show that the tests with our long-run variance estimator are consistent against large multiple structural changes. Simulation results show that the proposed test performs well in finite samples.
Funding
The author gratefully acknowledges the financial support by the Japan Society for the Promotion of Science (JSPS) Research Fellowship for Young Scientists (KAKENHI Grant Number 16J07085).