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On the reliability of chow type test for parameter constancy in multivariate dynamic models

Author

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  • Candelon, Bertrand
  • Lütkepohl, Helmut

Abstract

The small sample properties of two types of Chow tests are investigated in the context of multiple time series models. It is found that the tests may have substantially distorted size if the sample size is not large relative to the number of parameters in the model under study. In particular the tests reject far too often in this situation. It is shown that bootstrap versions of the tests have much better properties in this respect. In other words, the bootstrap can be used to size-adjust the tests.

Suggested Citation

  • Candelon, Bertrand & Lütkepohl, Helmut, 2000. "On the reliability of chow type test for parameter constancy in multivariate dynamic models," SFB 373 Discussion Papers 2000,95, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    • Handle: RePEc:zbw:sfb373:200095
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    References listed on IDEAS

    as
    1. Katarina Juselius, 1998. "Changing monetary transmission mechanisms within the EU," Empirical Economics, Springer, vol. 23(3), pages 455-481.
    2. Juselius, Katarina, 1996. "An Empirical Analysis of the Changing Role of the German Bundesbank after 1983," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(4), pages 791-819, November.
    3. Horowitz, Joel L., 2001. "The Bootstrap," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 52, pages 3159-3228, Elsevier.
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    More about this item

    Keywords

    vector autoregressive process; vector error correction model; bootstrap; stability tests;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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