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TESTING FOR STRUCTURAL CHANGE IN THE PRESENCE OF AUXILIARY MODELS

Published online by Cambridge University Press:  01 December 2004

Eric Ghysels  and
Alain Guay
Eric Ghysels
Affiliation:
University of North Carolina and CIRANO
Alain Guay
Affiliation:
Université du Québec à Montréal, CIRPÉE, and CIREQ
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Abstract

Several estimation procedures such as the efficient method of moments (EMM) of Gallant and Tauchen (1996, Econometric Theory 12, 657–681) and indirect inference procedure of Gouriéroux, Monfort, and Renault (1993, Journal of Applied Econometrics 8, S85–S118) involve two models, an auxiliary one and a model of interest. The role played by both models poses challenges and provides new opportunities for hypothesis testing beyond the usual Wald-, Lagrange multiplier–, and likelihood ratio–type tests. In this paper we present and derive the asymptotic distribution theory for various classes of tests for structural change. Some procedures are extensions of standard tests, whereas others are specific to the dual model setup and exploit its unique features.The first author gratefully acknowledges financial support from Fonds pour la Formation de Chercheurs et l'aide à la Recherche (FCAR). The second author acknowledges the financial support of the Natural Sciences and Engineering Research Council of Canada through a grant to NCM2 (Network for Computing and Mathematical Modeling). We also thank Alastair Hall and Éric Renault for comments on an earlier draft of the paper.

Type
Research Article
Information
Econometric Theory , Volume 20 , Issue 6 , December 2004 , pp. 1168 - 1202
Copyright
© 2004 Cambridge University Press

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