Pre and Post Break Parameter Inference

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Econometrics Seminar
University of Pennsylvania

3718 Locust Walk
410 McNeil

Philadelphia, PA

United States

Joint with: Ulrich K. Muller

This paper discusses inference about the pre and post break value of a scalar parameter in GMM time series models with a single break at an unknown point in time. We show that
treating the break date estimated by least squares as the true break date leads to substantially oversized tests and confidence intervals unless the break is large. We develop an alternative test that controls size uniformly and that is approximately efficient in some well defined sense.

For more information, contact Frank Schorfheide.

Graham Elliott

UCSD

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