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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