SSE/EFI Working Paper Series in Economics and Finance
No 648:
Determining the number of breaks in a piecewise linear regression model
Birgit Strikholm ()
Abstract: In this paper we propose a sequential method for
determining the number of breaks in piecewise linear structural break
models. An advantage of the method is that it is based on standard
statistical inference. Tests available for testing linearity against
switching regression type nonlinearity are applied sequentially to
determine the number of regimes in the structural break model. A simulation
study is performed in order to investigate the finite-sample behaviour of
the procedure and to compare it with other alternatives. We find that our
method works well in comparison for both single and multiple break
cases.
Keywords: Model specification; multiple structural breaks.; (follow links to similar papers)
JEL-Codes: C22; C51; (follow links to similar papers)
30 pages, December 13, 2006
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