Abstract
Variable addition tests for parameter stability are based on the use of test variables constructed as the product of dummy variables and the variables whose coefficient is believed to have changed. The object of this note is to analyze some power properties of this class of tests. The main conclusion is that the power of such tests against the null of no change depends on the length of the test period. It is suggested that, in absence of a priori information on the timing of breaks, a suitable strategy can be based on recursive testing. Copyright 1994 by Blackwell Publishing Ltd
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
