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Model Selection when there are Multiple Breaks

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  • Jennifer Castle
  • David Hendry
  • Jurgen A. Doornik

Abstract

We consider selecting an econometric model when there is uncertainty over both the choice of variables and the occurrence and timing of multiple location shifts. The theory of general-to-simple (Gets) selection is outlined and its efficacy demonstrated in a new set of simulation experiments first for a constant model in orthogonal variables, where only one decision is required to select irrespective of the number of regressors (less than the sample size). That generalizes to including an impulse indicator for every observation in the set of candidate regressors (impulse saturation), as analyzed by Hendry, Johansen and Santos (2008) and Johansen and Nielsen (2009). Monte Carlo experiments show its capability of detecting up to 20 shifts in 100 observations.

Suggested Citation

  • Jennifer Castle & David Hendry & Jurgen A. Doornik, 2008. "Model Selection when there are Multiple Breaks," Economics Series Working Papers 407, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:407
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    More about this item

    Keywords

    Model Selection; General-to-Specific; Structural Breaks;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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