Implementing a Class of Structural Change Tests An.pdfVIP

Implementing a Class of Structural Change Tests: An Econometric Computing Approach Achim Zeileis Institut fur Statistik und Mathematik, Wirtschaftsuniversitat Wien, Austria ¨ ¨ Abstract The implementation of a recently suggested class of structural change tests, which test for parameter instability in general parametric models, in the R language for statistical computing is described: Focus is given to the question how the conceptual tools can be translated into computational tools that reflect the properties and flexibility of the underlying econometric methodology while being numerically reliable and easy to use. More precisely, the class of generalized M-fluctuation tests is implemented in the package strucchange providing easily extensible functions for computing empirical fluctuation processes and automatic tabulation of critical values for a functional capturing excessive fluctuations. Traditional significance tests are supplemented by graphical methods which do not only vi- sualize the result of the testing procedure but also convey information about the nature and timing of the structural change and which component of the parametric model is affected by it. Keywords: econometric computing; R; structural change; M-estimation; fluctuation tests. 1 Introduction This paper is about combining two fields of econometric research—testing for structural change and econometric computing—with the following focus: How can a general class of tests be translated into a unified and sound implementation that reflects the conceptual properties of the theoretical tests and allows for as much flexibility as possible in app