A Unified Approach to Testing, Monitoring, and Dating Structural Changes
Speaker
Abstract
| A unified toolbox for testing, monitoring, and dating structural changes is presented for a general class of models in an M-estimation framework, including least squares and (quasi-)maximum likelihood. All techniques employ a model's objective function or associated estimating function, respectively; inference is established based on a functional central limit theorem that holds under the null hypothesis of structural stability. The resulting set of methods includes many well-established techniques, especially for least-squares regression, but also facilitates extension to a wide class of other models. The usefulness of this approach is illustrated by assessing the stability of "de facto" exchange rate regimes where a (quasi-)normal regression model is adopted to capture changes in the error variance as well as the regression coefficients. The toolbox is used for investigating the Chinese exchange rate regime after China gave up on a fixed exchange rate to the US dollar in 2005 and tracking the evolution of the Indian exchange rate regime from 1993-2007. |
| Contact information: |
| Erik Kole |
