Econometrica: Nov, 1988, Volume 56, Issue 6

Testing for Structural Change in Dynamic Models

https://doi.org/0012-9682(198811)56:6<1355:TFSCID>2.0.CO;2-4
p. 1355-1369

Raimund Alt, Walter Kramer, Werner Ploberger

The well known CUSUM test for structural change is investigated when there are lagged dependent variables among the regressors in a linear model. We show that both a modified CUSUM test, suggested by Dufour (1982), and the straightforward CUSUM test retain their asymptotic significance levels in dynamic models, and find that the power depends crucially on the angle between the mean regressor and the structural shift.