Testing for regime switching

• 成果类型: Article
• 署名作者: Cho, Jin Seo; White, Halbert
• 署名单位: Victoria University Wellington; University of California System; University of California San Diego
• 刊物名称: ECONOMETRICA
• ISSN/ISSBN: 0012-9682
• DOI: 10.1111/j.1468-0262.2007.00809.x
• 发表日期: 2007
• 页码: 1671-1720
• 关键词: likelihood ratio test; nuisance parameter; serial-correlation; cartel stability; time-series; mixture; CONVERGENCE; homogeneity; MODEL; weak

摘要

We analyze use of a quasi-likelihood ratio statistic for a mixture model to test the null hypothesis of one regime versus the alternative of two regimes in a Markov regime-switching context. This test exploits mixture properties implied by the regime-switching process, but ignores certain implied serial correlation properties. When formulated in the natural way, the setting is nonstandard, involving nuisance parameters on the boundary of the parameter space, nuisance parameters identified only under the alternative, or approximations using derivatives higher than second order. We exploit recent advances by Andrews (2001) and contribute to the literature by extending the scope of mixture models, obtaining asymptotic null distributions different from those in the literature. We further provide critical values for popular models or bounds for tail probabilities that are useful in constructing conservative critical values for regime-switching tests. We compare the size and power of our statistics to other useful tests for regime switching via Monte Carlo methods and find relatively good performance. We apply our methods to reexamine the classic cartel study of Porter (1983) and reaffirm Porter's findings.