A general test for time dependence in parameters

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Abstract

A new test for time-dependent parameters is proposed. The Trig-test is based on a trigonometric expansion to approximate the unknown functional form of the variation in the parameters concerned. It is shown to have the correct empirical size and excellent power to detect structural breaks and stochastic parameter variation. The appropriate use of the Trig-test is demonstrated by testing for structural breaks in the US inflation rate. The test detects a statistically significant increase in the US inflation rate beginning in the early 1970s and lasting through to the early 1980s. Copyright © 2004 John Wiley & Sons, Ltd.

Bibliographical metadata

Original languageEnglish
Pages (from-to)899-906
Number of pages7
JournalJournal of Applied Econometrics
Volume19
Issue number7
DOIs
Publication statusPublished - Nov 2004