Template-type: ReDIF-Paper 1.0
Author-Name: Bent Nielsen
Author-Email: bent.nielsen@economics.ox.ac.uk
Author-Workplace-Name: Dept of Economics, University of Oxford
Author-Name: Andrew Whitby
Author-Email: andrew.whitby@economics.ox.ac.uk
Author-Workplace-Name: Dept of Economics, University of Oxford
Title: A Joint Chow Test for Structural Instability
Abstract: The classical Chow (1960) test for structural instability requires strictly exogenous regressors
and a break-point specied in advance. In this paper we consider two generalisations,
the 1-step recursive Chow test (based on the sequence of studentized recursive residuals)
and its supremum counterpart, which relax these requirements. We use results on strong
consistency of regression estimators to show that the 1-step test is appropriate for stationary,
unit root or explosive processes modelled in the autoregressive distributed lags (ADL)
framework. We then use results in extreme value theory to develop a new supremum version
of the test, suitable for formal testing of structural instability with an unknown break-point.
The test assumes normality of errors, and is intended to be used in situations where this
can either be assumed or established empirically.
X-Keywords:
X-Classification-JEL: 
Length: 20 pages
Creation-Date: 2012-06-25
Number: 2012-W07
File-URL: http://www.nuffield.ox.ac.uk/economics/papers/2012/nielsenwhitby-jointchow.pdf
File-Format: application/pdf
Handle: RePEc:nuf:econwp:1207