Recursive stability analysis of linear regression relationships: An exploratory methodology

摘要: The problem of the instability econometric relationships over time has been recognized by several econometricians [e.g. Chow (1960), Duesenberry and Klein (1965), Cooley Prescott (1976)]. Parameter stability is especially important when one wants to use a model for forecasting policy simulations. For example, assessment demand money crucial importance in decisions about role monetary policy. Generally, using an study effect change, it essential that parameters be invariant with respect change contemplated. In this respect, Lucas (1976) shown that, since models reflect optimal decision rules economic agents these integrate knowledge rules, changes policies are likely induce relationships. Assessing such possible instabilities may particularly relevant context simulation studies. A fairly general way interpreting assume presence some sort misspecification (omitted variables, incorrect functional forms, etc.). One could also speak ‘structural changes’ economy but can always argued parameters’ mind changing because variables which determine them omitted from model,