Hypothesis Of Structural Change Research Articles

Detecting Structural Changes in Time Series by Using the BDS Test Recursively: An Application to COVID-19 Effects on International Stock Markets

Structural change tests aim to identify evidence of a structural break or change in the underlying generating process of a time series. The BDS test has its origins in chaos theory and seeks to test, using the correlation integral, the hypothesis that a time series is generated by an identically and independently distributed (IID) stochastic process over time. The BDS test is already widely used as a powerful tool for testing the hypothesis of white noise in the residuals of time series models. In this paper, we illustrate how the BDS test can be implemented also in a recursive manner to evaluate the hypothesis of structural change in a time series, taking advantage of its ability to test the IID hypothesis. We apply the BDS test repeatedly, starting with a sub-sample of the original time series and incrementally increasing the number of observations until it is applied to the full sample time series. A structural change in the unknown underlying generator model is detected when a change in the trend shown by this recursively computed BDS statistic is detected. The strength of this recursive BDS test lies in the fact that it does not require making any assumptions about the underlying time series generator model. We ilustrate the power and potential of this recursive BDS test through an application to real economic data. In this sense, we apply the test to assess the structural changes caused by the COVID-19 pandemic in international financial markets. Using daily data from the world’s top stock indices, we have detected strong and statistically significant evidence of two major structural changes during the period from June 2018 to June 2022. The first occurred in March 2020, coinciding with the onset of economic restrictions in the main Western countries as a result of the pandemic. The second occurred towards the end of August 2020, with the end of the main economic restrictions and the beginning of a new post-pandemic economic scenario. This methodology to test for structural changes in a time series is easy to implement and can detect changes in any system or process behind the time series even when this generating system is not known, and without the need to specify or estimate any a priori generating model. In this sense, the recursive BDS test could be incorporated as an initial preliminary step to any exercise of time series modeling. If a structural change is detected in a time series, rather than estimating a single predictive model for the full-sample time series, efforts should be made to estimate different predictive models, one for the time before and one for the time after the detected structural change.

Higher education as a differentiated product: structural changes in the demand model

Object. Market for higher education services undergo several transformations for the last 20 years now: development of commercial education, changes in the principal of universites` application, tightening requirements to universities and their branches that resulted in a significant decrease in quantity of them. The research studies the structure of market for higher education services in Russia based on the data of universities in Moscow and Moscow region for 2019 year by assessing the demand function and testing it for structural changes. The purpose of the work is to conduct a regression analysis of demand for higher education services in Russia and to test the hypothesis of structural changes in the demand model being an evidence of the degree of differentiation. Methodology. The idea of the model and the estimation procedure is borrowed from the article of Ber- ry (1994) so that we conduct the regression analysis for the dependent variable of the share of students in the particular university. The hypothesis of structural changes in the model of demand on higher education is tested by dividing the sample in two clusters by the values of the regressors; in two groups with the high and low positions in the university rank; in two groups by education program in Econom- ics and Management. The results of the research allow to identify the peculiarities of university choice. Applicants of low rank universities more often make choice in favor of education program Management rather than Eco- nomics; additional free places to study significantly increase the quantity of potential students being a decisive factor of university application. Applicants of high rank universities account for the number of free places in a less extent results indicate a high differentiation level between universities. The number of Economics and Management students of high rank universities significantly depends on the military department. The results allow us to conclude about high level of differentiation and low level of substi- tution on the market for higher education services.

Structural changes in Russian inflation model

Hypothesis of structural changes in regression models of Russian inflation is tested in the paper. For testing this hypothesis and for estimation of instants of structural changes a new nonparametric method of the retrospective change-point detection in multivariate non-stationary econometric models is used. As initial data for this method we used official time series of consumer price index, indices of foodstuffs, non-food goods, paid services, and industrial production price index. Application of the nonparametric retrospective change-point detection method to regressions, calibrated for price indexes in Russia with period 1995–2018 gives some change points which can be classified by corresponding events in Russian economy at the time such as the Russian crisis of 1998, Tax Legislation reforms of 2000, world economic crises of 2008 and 2014 year.

How Large are the Contributions of Cities to the Development of Rural Communities? A Market Access Approach for a Quarter Century of Evidence from Chile

This article estimates the impact of cities on the economic development of rural communities in Chile, following a market access approach. The effect of the proximity to cities on the development of rural communities is analyzed by estimating the impact of market access on the population, and farm and non-farm employment of rural communities. Using population censuses and remote sensing data, we find, in our preferred estimations, that a 10% higher market access induced a 10%–14% increase in the population of rural communities. Additionally, higher positive elasticities are found in the non-farm sector rather than in the agricultural one. These results widely support the hypothesis of structural change and the diversification of the rural economy for rural communities with better access to markets. Notwithstanding, the evidence also suggests that the farm sector took important advantages from market access in places with better agro-ecological conditions.

Sustainability certification and product substitutability: Evidence from the seafood market

Ecolabels address the asymmetry of information between producers and consumers regarding credence attributes. If consumers prefer a product with an ecolabel, the label will create product differentiation and a reduction in substitutability between ecolabeled and non-labeled products. Fisheries certification programs for sustainability have rapidly increased their significance within international seafood markets as a mechanism to create market-based incentives for improved global fisheries management and practices by differentiating seafood products with ecolabels. While there exists growing evidence of market benefits in the price dimension, this analysis investigates both price and quantity effects of fisheries certification by testing the hypothesis of structural changes in demand at the import (wholesale) level to determine if, in the period after sustainability certification, there were significant changes in market shares or substitutability between certified and uncertified frozen walleye (Alaska) pollock (Theragra chalcogramma) imported by Germany. A linear, first-differenced, inverse almost ideal demand system (IAIDS), incorporating a dynamic transition function, is used to estimate German imports of certified pollock from the U.S. and uncertified pollock from Russia and China. Results indicate no statistically significant change in market shares, although there were significant effects on the price flexibilities. The price of certified US pollock became less sensitive not only to changes in own quantity of imports but also to changes in import volumes of non-certified Russian pollock. These market changes may provide insight into economic incentives that may have led the Russian government to strengthen its national fisheries management policies to gain certification.

The Environmental Kuznets Curve and the Structural Change Hypothesis

We provide a very simple macroeconomic investigation of the role that structural changes might play in generating inverted U-shaped income–pollution relationships. Differently from previous research which mainly focuses on empirical, static or general equilibrium models, we develop a standard balanced growth path (BGP) analysis. We show that along the BGP equilibrium an inverted U-shaped income–pollution relationship may occur as a response to structural changes, but whether this is the case or not it will crucially depend upon the magnitude of a production externality parameter. Moreover, we show that the negative relationship between income and pollution can only be a transitory phenomenon, and in the long run pollution will increase as income rises, generating overall an N-shaped pattern.

Time Series Tests of Structural Change among Innovation and Trade Liberalization in Mexico

This work analyzes if there has been a structural change in the flow of patents in Mexico, as a consequence of institutional reforms and economic policies. To explore the structural change hypothesis, time series models and unit root tests are used in both series of patents applications for the country’s residents and nonresidents. The analysis indicates that misleading conclusions can be obtained if the presence of structural breaks is not taken into account. Results show until two structural breaks in each series that are widely linked with changes in the economic activity. However, the structural changes occurred in each series, disagree in the estimated breakpoint, for the residents’ series it seems to occur before of the trade openness, meanwhile for the nonresidents the two break points are estimated after the trade openness. Intuitively, innovation activities become more important with the arrival of multinationals as a consequence of the liberal reforms. Our findings about the presence of two structural breaks characterizing the patents series would be indicating that the Mexican economy has experienced a process of technology learning due to the trade reforms implemented since the 1980s, a result in concordance with the theories that sustain that trade liberalization promotes economic growth.

Bootstrap-based tests for deterministic time-varying coefficients in regression models

The problem of structural change justifiably attracts considerable attention in econometrics. A number of different paradigms have been adopted, ranging from structural breaks which are sudden and rare, to time-varying coefficient models, which exhibit structural change more frequently and continuously. This paper is concerned with parametric econometric models whose coefficients change deterministically and smoothly over time. In particular, tests for the null hypothesis of no structural change versus the alternative hypothesis of smooth deterministic structural change are provided and discussed. The use of bootstrap tests is advocated. These tests perform well in an extensive Monte Carlo study.

On the sources of the high growth experience in Austria

This paper attempts to investigate and empirically verify several explanations for the growth performance in Austria. Total factor productivity data for Austria are presented for the first time, adopting a growth regression method. We find that the real appreciations, supported by structural change, gross investment, union density, a low duration of unemployment, and high youth employment, exhibit a significant influence on economic growth. This validates the new capital vintage hypothesis, the hard currency policy hypothesis, the structural change hypothesis, and both the macro- and microinstitutions hypotheses, while all others fail according to this exercise.

Tests of structural change using factor analysis in equity returns

Ever since the Arbitrage Pricing Theory (APT) was developed by Ross, it has been empirically tested in many countries in studying the behaviour of Stock Market returns. The statistical technique of factor analysis is used in the testing of the APT. The objective of this paper is to determine how the hypothesis of structural change in Stock Market returns can be investigated within the context of factor analysis. A total of 257 monthly security returns listed on the London Stock Exchange covering the period January 1976 to December 1993 are used. The data period incorporates the Stock Market Crash of October 1987.

Sovereignty, Separation and Risk Premiums

AbstractThis study investigates the risk premia of Canadian debt issuers in the U.S. capital markets under conditions of sovereignty stress. In particular, the impact of separatist activity is considered. The incidence of separation news around the sale of debt issues is associated with a specific increase in the proceeds yield or cost to the issuer, but not the market yield. Debt issues by Quebec parties within the separation news event window had an added cost. The added cost is estimated at more than 0.56% to the issuer or about $1.30 million per average $230.77 million issue. These costs are additional fees that are paid to the investment banking syndicate, but these do not increase the yield to the investors. Brown, Durbin and Evans (BDE) recursive residuals tests support the hypothesis of structural changes over time in the pricing process. Debt issues from other countries facing political risk may be priced in a similar manner.

Model for the vibrational spectra of B2O3-xLi2O.

A nested coherent-potential approximation in the Bethe lattice is used to model the vibrational spectra in the vitreous compound ${\mathrm{B}}_{2}$${\mathrm{O}}_{3}$-x${\mathrm{Li}}_{2}$O. A local-polarizability model is applied to calculate the Raman and infrared activity of the modes, and the results are compared with experimental data. The agreement is not complete due to the presence of rather complicated local configurations in the glass, as boroxol rings, diborate and tetraborate groups, not taken into account in the theory. However, this calculation is useful to identify the main features of the experimental spectra, and to corroborate the hypothesis of structural changes that occur when doping the pure boron oxide with an alkali-metal oxide.

The Strike as Management Strategy

Two possible explanations have been offered for the declining rate of unionization in the U.S. economy, which peaked at 33.7 percent of the nonagricultural labor force in 1954 and dropped to 16 percent in 1991. Structural changes and import penetration are one common explanation; increased management opposition caused by the union/nonunion wage differential is another. However, neither explains the 1983 Phelps Dodge strike. To explain that strike requires strategic choice theory. Further, Ability to Pay/Ability to Make Pay models of relative bargaining power must be modified to reflect the expanded range of options and strategies that employers today are choosing to exercise. The structural change hypothesis contends that recent shifts in demographic, geographic, and demand variables have been unfavorable to the expansion of union membership. The shift from blue-collar manufactured goods to white-collar services, the large proportion of the increase in employment accounted for by women, youths, and part-time workers, and the relocation of industries from the Northeast and Midwest to the South and Southwest have eroded traditional union strongholds. Also, the union pay differential may have reduced union employment by encouraging capital substitution, subcontracting, and relocation.

Changes in the Cost of Intermediation: The Case of Savings and Loans

ABSTRACTThe minimum cost output configuration for a firm may change as the result of a variety of factors, including changes in market structure. In this paper we test this structural change hypothesis with savings and loan data. We find support for the hypothesis that separable, constant returns to scale production functions characterize the average savings and loan in our sample in 1983. This is in contrast to the cost complementarities found in 1978. We argue that this result may be the result of regulatory changes that allowed savings and loans to alter their production mix to fully capture the benefits of joint production.

Changes in the Cost of Intermediation: The Case of Savings and Loans

The minimum cost output configuration for a firm may change as the result of a variety of factors, including changes in market structure. In this paper we test this structural change hypothesis with savings and loan data. We find support for the hypothesis that separable, constant returns to scale production functions characterize the average savings and loan in our sample in 1983. This is in contrast to the cost complementarities found in 1978. We argue that this result may be the result of regulatory changes that allowed savings and loans to alter their production mix to fully capture the benefits of joint production.

Structural change and unit root econometrics

The paper analyzes the systematic bias in tests for I( d) models with constant parameters against I( d-1) models with time varying parameters. It is shown that, if the true process has deterministic structural change we will accept the unit root hypothesis against a model corresponding to the true one but in which data of structural change is misspecified; moreover, if the true process is a random walk, a ‘goodness of fit’ criteria will lead one to accept the hypothesis of structural change against that of no change.

Modeling the Pattern of Structural Change in U.S. Meat Demand

AbstractThe hypothesis of structural change in U.S. meat demand is tested in a four‐meat almost ideal demand system with parameters following a gradual switching regression model. The results support the notion that structural change partly explains the observed U.S. meat consumption patterns. Structural change is biased against beef, neutral for pork, in favor of chicken and fish, and it does not affect estimated elasticities. The estimated path of structural change implies a rapid transition to a new regime in the mid‐1970s, although a smooth path cannot be ruled out.

Microeconomic Output Supply and Factor Demand Functions in the Agriculture of the Province of Taiwan

Normalized restricted profit functions have been employed in the empirical analysis of agricultural production by Lau and Yotopoulos in a crosssectional study of farms in India. The objective of the present study is to apply the same methodology to the analysis of data from a cross section of farm households in the Province of Taiwan, Republic of China. Two features distinguish this study from the earlier one. First, the number of variable inputs is increased from one to four. Second, the hypothesis of structural change as between successive cross sections is tested. Such a test of structural change may be interpreted as a test of the stability of the estimated production function parameters.

An Analysis of Changes in the Distribution of Employment Between the Manufacturing and Service Industries 1960-1970

SINCE the formulation of the Fisher-Clark hypothesis of structural change, which associates changes in the distribution of employment between industries with changes in levels of real income per head, economists have been interested in the reasons behind changes in industry structure.' interest has received a fillip in recent years with an apparent acceleration in the rate of growth of employment in the service sector compared with that in the manufacturing sector.2 Recent empirical studies by, for example, Fuchs (1965) and Dowie (1970) have sought to explain the relatively faster rate of growth of employment in service industries than in manufacturing (or goods) industries in terms of the supply and demand characteristics of the products of the two sectors. In both studies it was found that the ratio of product of the two sectors remained fairly constant but that there was an appreciably faster rate of growth in productivity in manufacturing than in the service industries. It is concluded that difference in the supply characteristics of the two sectors is the main cause of the structural change. Both writers also suggest that constancy of product shares implies similar income elasticities of demand for the product of the two sectors. These conclusions, however, must be subject to two qualifications. First, the approach adopted does not allow for possible interaction between demand and supply.3 Demand and supply effects are assumed to be independent. But, as shown below, supply effects, as a result of differences in rates of productivity change, are likely to affect the relative rates of growth of product of the two sectors. Hence, constancy of product shares does not necessarily imply that demand factors are neutral. Interactive effects occur because different rates of productivity change, affect relative prices, which in turn lead to price substitution between the products of the two sectors.4 importance of these effects depends therefore on the differences in the rates of productivity change and the price elasticities of demand for the products of the sectors. following illustration shows how the effect operates.5 Let m equal the continuously compounded percentage rate of change in service sector employment over time minus the percentage rate of change in goods sector employment. Then as an approximation where r is the percentage rate m -r(nn,) + (rr,)(-1), of increase in real income, ns is the income elasticity of demand for services, nt0 is the income elasticity of demand for goods, rs is the percentage rate of increase in total factor proReceived for publication January 23, 1973. Revision accepted for publication January 30, 1974. * All the computer simulations required for this study were carried out by Margaret Wood. Helpful comments on an earlier draft were made by Dr. C. I. Higgins, Dr. R. G. Gregory, Mr. J. S. Marsden. Some of the data needed for this study are not available in official Australian statistics and were specially estimated. Notes on estimates are available from the author. complete set of equations used in the model, together with the usual tests of significance, are also available from the author. 1 In the first (1940) edition of The Conditions of Economic Progress Clark observed that studying economic progress in relation to the economic structure of different countries, we find a very firmly established generalization that a higher average level of real income per head is always associated with a high proportion of the working population engaged in tertiary industries . (pp. 6-7). Clark was not, of course, the first economist to discuss changes in industry structure; see, for example, Marshall (1938), pp. 276-277, and Clark himself drew attention to Petty's writings on this topic, in the 17th century (Clark (1957), pp. 176-177). But Clark's analysis is, however, more comprehensive than that of earlier writers. 2 For example, in Australia (Dowie (1970), p. 222) and in the United States (Fuchs (1957), pp. 6-8). Comparison of rates of increase in employment by sector for other countries is given in O.E.C.D. (1970). 3 This does not imply that Fuchs and Dowie are unaware of the importance of the interaction, but the results assume that they are insignificant. 4 cf. Baumol (1967) for a discussion of the relationship between changes in productivity, prices and demand. 5 This formulation was suggested by a referee.

The Predictive Performance of Econometric Models of Quarterly Investment Behavior

In this paper four alternative quarterly econometric models of investment behavior are compared with regard to predictive performance. Predictive performance may be assessed in two ways: (i) We compare prediction errors for a period of prediction with errors for a period of fit. (ii) We fit investment functions for both periods and test for structural change. These two procedures may be viewed as alternative tests of the hypothesis of structural change; the second is more powerful from the statistical point of view. Tests of predictive performance supplement the comparisons of alternative models given in our preceding paper [17]. Goodness of fit may be exaggerated by consideration of a wide range of alternatives and selection of the one that fits best. If goodness of fit is exaggerated, a predictive test should produce evidence of structural change between the period of fit and the period of prediction. Of course, the better an econometric model fits the data, the more stringent this criterion for predictive performance. The econometric models included in our study are those of Anderson [1], Eisner [7], Jorgenson and Stephenson [19], and Meyer and Glauber [21]. On the basis of predictive performance the ranking of the alternative models is as follows: (1) Eisner, (2) JorgensonStephenson, (3) Meyer-Glauber, and (4) Anderson. This ranking is similar to that resulting from comparisons based on goodness of fit presented in our preceding paper [17]. For econometric models of quarterly investment behavior, the models that fit the best also have the best predictive performance.