Premium
A general test for time dependence in parameters
Author(s) -
Becker Ralf,
Enders Walter,
Hurn Stan
Publication year - 2004
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.751
Subject(s) - econometrics , variation (astronomy) , test (biology) , inflation (cosmology) , mathematics , statistics , economics , physics , paleontology , theoretical physics , astrophysics , biology
A new test for time‐dependent parameters is proposed. The Trig ‐test is based on a trigonometric expansion to approximate the unknown functional form of the variation in the parameters concerned. It is shown to have the correct empirical size and excellent power to detect structural breaks and stochastic parameter variation. The appropriate use of the Trig ‐test is demonstrated by testing for structural breaks in the US inflation rate. The test detects a statistically significant increase in the US inflation rate beginning in the early 1970s and lasting through to the early 1980s. Copyright © 2004 John Wiley & Sons, Ltd.