MOSUM tests for parameter constancy

Abstract

SUMMARY In this paper, tests for structural change based on moving sums (MosuMs) of recursive and least-squares residuals are investigated. We obtain and tabulate the asymptotic critical values of the MOSUM test with recursive residuals and show that the asymptotic critical values of the MOSUM test with least-squares residuals can easily be obtained from already existing tables for the moving-estimates test. We also show that these MOSUM tests are consistent and have nontrivial local power against a general class of alternatives. Our simulations further indicate that the proposed MOSUM tests can complement other tests when there is a single structural change and have power advantage when there are certain double structural changes.