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International Journal of Business and Economics

International Journal of Business and Economics
Volume 1, No. 3

December, 2002
 
Testing for Structural Changes in the Presence of Long Memory
 
Walter Kr ä mer
Fachbereich Statistik, Universitat Dortmund, Germany
 
Philipp Sibbertsen
Fachbereich Statistik, Universitat Dortmund, Germany
 
Abstract
We derive the limiting null distributions of the standard and OLS-based CUSUM- tests for a structural change of the coefficients of a linear regression model in the context of long-memory disturbances. We show that both tests behave fundamentally different in a long-memory environment, as compared to short memory, and that long memory is easily mistaken for structural change when standard critical values are employed.
 
Keywords:long memory, structural change, CUSUM- tests.
 
JEL Classifications:C12, C22, C52.
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