TESTING THE CONSTANCY OF REGRESSION PARAMETERS AGAINST CONTINUOUS STRUCTURAL-CHANGE

A standard explicit or implicit assumption underlying many parameter constancy tests in linear models is that there is a single structural break in the sample. In this paper that assumption is replaced by a more general one stating that the parameters of the model may change continuously over time. The pattern of change is parameterized giving rise to a set of parameter constancy tests against a parameterized alternative. The power properties of the LM type tests in small samples are compared to those of other tests like the CUSUM and Fluctuation Test by simulation and found very satisfactory. An application is considered.