Testing for shifts in mean with monotonic power against multiple structural changes |
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Authors: | Daisuke Yamazaki |
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Institution: | Faculty of Economics, Kyushu University, Fukuoka, Japan |
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Abstract: | 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. |
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Keywords: | Structural change non-monotonic power long-run variance |
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