ESTIMATING AND TESTING LINEAR-MODELS WITH MULTIPLE STRUCTURAL-CHANGES

This paper considers issues related to multiple structural changes, oc curring at unknown dates, in the linear regression model estimated by least squares. The main aspects are the properties of the estimators, including the estimates of the break dates, and the construction of te sts that allow inference to be made about the presence of structural c hange and the number of breaks. We consider the general case of a part ial structural change model where not all parameters are subject to sh ifts. We study both fixed and shrinking magnitudes of shifts and obtai n the rates of convergence for the estimated break fractions. We also propose a procedure that allows one to test the null hypothesis of, sa y, l changes, versus the alternative hypothesis of l+1 changes. This i s particularly useful in that it allows a specific to general modeling strategy to consistently determine the appropriate number of changes present. An estimation strategy for which the location of the breaks n eed not be simultaneously determined is discussed. Instead, our method successively estimates each break point.