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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 507:
Testing parameter constancy in stationary vector autoregressive models against continuous change

Changli He (), Timo Teršsvirta () and Andres GonzŠlez ()

Abstract: In this paper we derive a parameter constancy test of a stationary vector autoregressive model against the hypothesis that the parameters of the model change smoothly over time. A single structural break is contained in this alternative hypothesis as a special case. The test is a generalization of a single-equation test of a similar hypothesis proposed in the literature. An advantage here is that the asymptotic distribution theory is standard. The performance of the tests is compared to that of generalized Chow-tests and found satisfactory in terms of both size and power.

Keywords: econometric modelling; misspecification test; parameter stability; smooth transition; structural break; (follow links to similar papers)

JEL-Codes: C32; C52; (follow links to similar papers)

24 pages, August 30, 2002, Revised July 11, 2005

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This paper is published as:
He, Changli, Timo Teršsvirta and Andres GonzŠlez, (2009), 'Testing parameter constancy in stationary vector autoregressive models against continuous change', Econometric Reviews, Vol. 28, pages 225-245



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