Robust GMM tests for structural breaks
نویسندگان
چکیده
We propose a class of new robust Generalized Method of Moments (GMM) tests for endogenous structural breaks. The tests are based on supremum, average and exponential functionals derived from robust GMM estimators with bounded influence function. We study the theoretical local robustness properties of the new tests and show that they imply a uniformly bounded asymptotic sensitivity of size and power under general local deviations from a reference model. We then analyze the finite sample performance of the new robust tests via Monte Carlo simulations, and compare it with that of classical GMM tests for structural breaks. In large samples, we find that the performance of classical asymptotic GMM tests can be quite unstable under slight departures from some given reference distribution. In particular, the loss in power can be substantial in some models. Robust asymptotic tests for structural breaks yield important power improvements both in exactly identified and overidentified model settings. In small samples, bootstrapped versions of the classical and the robust GMM tests provide accurate and stable empirical levels also for quite small sample sizes. However, bootstrapped robust GMM tests are found to provide again a higher finite sample efficiency. r 2004 Elsevier B.V. All rights reserved. JEL classification: C10; C12; C13; C15
منابع مشابه
Purchasing Power Parity Hypothesis In OIC Countries: Evidence From Panel Unit Root Tests With Heterogeneous Structural Breaks
متن کامل
Stationarity of health expenditures and GDP: evidence from panel unit root tests with heterogeneous structural breaks.
This paper re-examines the stationarity of national health care expenditures and GDP in a panel setting utilizing data from 20 OECD countries over the period from 1960 to 1997. Previous research in this area has recognized the drawback of not allowing for structural breaks in their unit root tests and noted that their empirical results may not be robust. We advance the literature by utilizing a...
متن کاملA New Nonlinear Specification of Structural Breaks for Money Demand in Iran
In a structural time series regression model, binary variables have been used to quantify qualitative or categorical quantitative events such as politic and economic structural breaks, regions, age groups and etc. The use of the binary dummy variables is not reasonable because the effect of an event decreases (increases) gradually over time not at once. The simple and basic idea in this paper i...
متن کاملSeasonal Unit Root Tests Under Structural Breaks
In this paper, several seasonal unit root tests are analysed in the context of structural breaks at known time and a new break corrected test is suggested. We show that the widely used HEGY test as well as an LM variant thereof are asymptotically robust to seasonal mean shifts of finite magnitude. In finite samples, however, experiments reveal that such tests suffer from severe size distortions...
متن کاملRobust Gmm Tests for Model Specification, with Applications to Conditional Moments Testing and Structural Instability Testing
Tests for model specification based on the generalized method of moments have been widely used in the literature. Most of the popular tests typically require estimators which are efficient under the hypotheses that models chosen for estimation are correctly specified. This paper develops alternative tests which can be obtained using any consistent estimator. In particular, the test statistics a...
متن کامل