Hello,
Iâm using strucchange package in R software in order to apply Bai and
Peron (1998, 2003) structural break tests to a set of n=1671
observations with a constant term (no AR terms).
For that purpose I have read several papers, for instance âValidating
Multiple Structural Change Models â An Extended Case Studyâ, in which
its aim is to replicate the results from Bai and Perron (2003) in R
software.
But, as far as I had understood, the rule of thumb for selecting the
number of breaks in data is the BIC (or RSS) criteria. However, that
kind of procedure is often downward-biased. Bai and Perron (1998, 2003)
argue in favour of a sequential procedure:
a) First select a Sup F type test of no structural break (m=0)
versus m=k breaks;
b) Often, an investigator wishes not to pre-specify a particular
number of breaks to make inference. To allow this BP have introduced two
tests of the null hypothesis of no structural break against an unknown
number of breaks given some upper bound M. These are called the double
maximum tests;
c) BP proposed a test for l versus l+1 breaks, labelled supFT
(l+1/ l). The method amounts to the application of (l+1) tests of the
null hypothesis of no structural change versus the alternative
hypothesis of a single change.
Questions:
1) I think it is possible to make a) and b) in the strucchange
package. In a) one would simply make call of Fstats function whereas in
b) one would call the efpFunctional. Am I right? How it really works in
practice?
2) However, I think there is no code in the strucchange package
for the test in c). Could you help me, please?
Kind Regards,
João Boavida
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