Title:
Structural Breaks and
Time-varying
Parameter: A Survey with Application
Abstract: The theme of instability or
breaks
in macroeconomic series have received a lot of attention over the last
several
decades. There are a large number of tests for structural changes or
the
stability of parameters. This paper reviews the traditional unit-root
tests,
the unit-root tests taking into account possible structural breaks, and
time-varying
parameter literature. Tests could lead to a bias without regard to
existing
breaks. Allowed for many breaks in the regression coefficients,
time-varying
parameter models have good power and small properties to test parameter
stability
(Elliott and Müller, 2006). Additionally, this paper provides a
survey
of the empirical studies and an application for China’s macroeconomic
series
and shows many macroeconomic series seem to turn out to be unstable.
Author: Shu Quan Lu