ECON301_Handout_12_1213_02

# In this case each observation would have its own

• Notes
• 19

This preview shows page 9 out of 19 pages.

could be considered consistent with the estimated equation. In this case each observation would have its own period-specific dummy. Such tests are sometimes called post-sample predictive tests. Consider the following model ( t =1 991, 1992, …,2000) : 0 1 1 2 2 2001 2001 2002 2002 2003 2003 t t t t Y X X e I e I e I u where the observation-specific dummies of 2001 I , 2002 I and 2003 I are defined as: 2001 1 for 2001 0 otherwise I , 2002 1 for 2002 0 otherwise I , 2003 1 for 2003 0 otherwise I Here, the coefficients of observation-specific dummies denoted by 2001 e , 2002 e and 2003 e are the expected value of forecast errors (prediction errors) of the corresponding years (The proof is beyond the scope of this lecture). In order to test for structural change in 2001, 2002 and 2003; we can test 2001 e , 2002 e and 2003 e individually (t test) and jointly (F test) different from zero.

#### You've reached the end of your free preview.

Want to read all 19 pages?

{[ snackBarMessage ]}

###### "Before using Course Hero my grade was at 78%. By the end of the semester my grade was at 90%. I could not have done it without all the class material I found."
— Christopher R., University of Rhode Island '15, Course Hero Intern

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern