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Testing for structural breaks in factor loadings: An application to international business cycle

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  • Bueno, José Luis Cendejas
  • Santos, Sonia de Lucas
  • Rodríguez, Ma Jesús Delgado
  • Ayuso, Inmaculada Álvarez
Abstract
This paper proposes the implementation of the SupWald test of Andrews (1993) to detect structural breaks in the loadings of a static factor model. The procedure is illustrated by testing for structural breaks in the common factors of GDP growth series for a sample of advanced countries from 1950 until 2006.

Suggested Citation

  • Bueno, José Luis Cendejas & Santos, Sonia de Lucas & Rodríguez, Ma Jesús Delgado & Ayuso, Inmaculada Álvarez, 2011. "Testing for structural breaks in factor loadings: An application to international business cycle," Economic Modelling, Elsevier, vol. 28(1), pages 259-263.
    • Handle: RePEc:eee:ecmode:v:28:y:2011:i:1:p:259-263
    DOI: 10.1016/j.econmod.2010.09.004
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    1. Jushan Bai & Serena Ng, 2002. "Determining the Number of Factors in Approximate Factor Models," Econometrica, Econometric Society, vol. 70(1), pages 191-221, January.
    2. Anindya Banerjee & Massimiliano Marcellino & Igor Masten, 2008. "Forecasting Macroeconomic Variables Using Diffusion Indexes in Short Samples with Structural Change," Working Papers 334, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    3. Donald W. K. Andrews, 2003. "Tests for Parameter Instability and Structural Change with Unknown Change Point: A Corrigendum," Econometrica, Econometric Society, vol. 71(1), pages 395-397, January.
    4. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-856, July.
    5. Mario Forni & Marc Hallin & Marco Lippi & Lucrezia Reichlin, 2000. "The Generalized Dynamic-Factor Model: Identification And Estimation," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 540-554, November.
    6. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    7. Whitney Newey & Kenneth West, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    8. Stock J.H. & Watson M.W., 2002. "Forecasting Using Principal Components From a Large Number of Predictors," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 1167-1179, December.
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    Cited by:

    1. de Lucas-Santos, Sonia & Delgado-Rodríguez, María Jesús & Cabezas-Ares, Alfredo, 2021. "Cyclical convergence in per capita carbon dioxide emission in US states: A dynamic unobserved component approach," Energy, Elsevier, vol. 217(C).
    2. Lee, Jim, 2012. "Measuring business cycle comovements in Europe: Evidence from a dynamic factor model with time-varying parameters," Economics Letters, Elsevier, vol. 115(3), pages 438-440.
    3. Maria Jesús Delgado-Rodriguez & Sonia De lucas-Santos, 2013. "Testing cyclical convergence with the factor model in the Euro Area," Economics Bulletin, AccessEcon, vol. 33(3), pages 2245-2250.
    4. Alfredo Cabezas-Ares & María Jesús Delgado-Rodríguez & Sonia de Lucas-Santos, 2020. "The Dynamics of Cyclical Convergence and Decoupling in the Environmental Performance of Spanish Regions," Sustainability, MDPI, vol. 12(20), pages 1-14, October.
    5. Santos, Sonia de Lucas & Rodríguez, María Jesús Delgado & Ayuso, Inmaculada Álvarez, 2011. "Application of factor models for the identification of countries sharing international reference-cycles," Economic Modelling, Elsevier, vol. 28(6), pages 2424-2431.
    6. María Jesús Delgado-Rodríguez & Sonia de Lucas-Santos & Alfredo Cabezas-Ares, 2021. "Short-Run Links in Ecological Footprint: A Dynamic Factor Analysis for the EU," Land, MDPI, vol. 10(12), pages 1-12, December.

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    Keywords

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    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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