The authors acknowledge financial support from the UK Economic and Social Research Council (ESRC), under grant RES-062-23-1351. We are also grateful to two referees for their constructive comments on an earlier version of the paper, and to Heather Anderson, Elena Andreou and Farshid Vahid for helpful discussions.
Inference on Structural Breaks using Information Criteria
Article first published online: 29 JUL 2013
© 2013 The University of Manchester and John Wiley & Sons Ltd.
This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
The Manchester School
Special Issue: Structural Breaks and Monetary Policy
Volume 81, Issue Supplement S3, pages 54–81, October 2013
How to Cite
Hall, A. R., Osborn, D. R. and Sakkas, N. (2013), Inference on Structural Breaks using Information Criteria. The Manchester School, 81: 54–81. doi: 10.1111/manc.12017
- Issue published online: 30 OCT 2013
- Article first published online: 29 JUL 2013
- Manuscript Revised: 26 MAR 2013
- Manuscript Received: 22 MAY 2012
- UK Economic and Social Research Council (ESRC). Grant Number: RES-062-23-1351
This paper investigates the usefulness of information criteria for inference on the number of structural breaks in a standard linear regression model. In particular, we propose a modified penalty function for such criteria, which implies each break is equivalent to estimation of three individual regression coefficients. A Monte Carlo analysis compares information criteria to sequential testing, with the modified Bayesian and Hannan–Quinn criteria performing well overall, for data-generating processes both without and with breaks. The methods are also used to examine changes in Euro area monetary policy between 1971 and 2007.