UA-cam recently changed the way my content will be monetised. My channel now needs 1,000 subscribers. So it would be amazing if you show your support by both watching my videos and subscribing to my channel if you haven’t done so already. Monetising my videos allows me to invest back into the channel with some new equipment so this small gesture from you will be extremely huge for me. Many thanks for your support….CrunchEconometrix loves to teach, help me stay online.
Thanks for this enriching tutorial on chow test. I really learnt a great deal. I followed the entire process in doing my own analysis and it worked perfectly well up until when I added dummy variables as an interaction term to the main regressors in my model. Then trying to run the analysis, the result said: singular matrx. This has always happened whenever I used dummy variables in my regression. How do I overcome this?
This is great, but how do I create the dummy before and after structural breakpoints if I have two breakpoints? Suppose I have a dataset from 1995 to 2020 and two breaks in 2003 and 2010. So before 2003, I had to put 0; after 2003, it had to be 1, but again, I had to put before 2010. So please help me.
You are correct on the 1st break point. For the 2nd, put 0 from 1995 to 2009, and 1 from 2010 to 2020. The break dummies will be in different columns. This would be very easy in Stata. Never tried it in EViews.
Mam thank you very much for making such kind of excellent vidoes i leant a lot from these vidoes,and downdload the vidoes..stay always bless..afsar uddin from pakistan.
Thanks Afsar, for the positive feedback and remarks on my UA-cam videos. Deeply appreciated! Kindly assist me in sharing the link to my UA-cam Channel with your friends and academic community in Pakistan 🇵🇰. They will find the content helpful too. God bless you as you do, amen 🙏
Do structural breaks exist for panel data? I am conducting panel cointegration analysis for 9 countries over the period (1992-2015). My model contains 7 variables. I performed two unit root tests (the ADF and the PP), for the variables, the results were mixed. According to the ADF, the two variables are non-stationary at level, while according to the PP, the two variables are stationary at level. How can I take my decision ?
Which hypothesis test can help me to know how to specify the model correctly? How to test whether the specification should be with break in the intercept, break in the slopes or in the intercept and slopes?
Hi Leonela, you may need to watch my other videos on structural break analysis. Also, read the recommended articles listed at the end of the videos. Thanks
Thanks for such an informative video. I did the same however my Model is ARDl. After applying necessary chow test requirements., My break point has shifted to a new point...what to do?
This tutorial was very useful and was very help me lots. But I am still need your help and I am still strugling on running SVAR either on stata or eviews. Can you please help make a video on Structural VAR (SVAR) model include data construction for this model? Thank you very much in advance Prof.
Hi Tobatoba, thanks for the positive feedback. Deeply appreciated. SVAR is quite technical but I've penned it down for future assignments which will be uploaded to my Teachable paid platform. You can sign up or enroll with $200 to access all videos published in the School cruncheconometrix.teachable.com. Thanks.
Haloo I'm from indonesia. First, thank you for sharing your knowledge in here and these is very helpful. And I wanna ask, in your video, you took an DLNDC and DSEDU.. How could you get those variable? Thank you 😊 Your videos very
Hi Amelia, thanks for the positive feedback on my videos. Deeply appreciated. Go to QUICK, GENERATE SERIES, in the equation box, type: dlndc = d(lndc), OK. Do same for all variables of interest....and nice to hear from Indonesia too!
No. It is tested on the DEPENDENT variable. If there are 2 breakpoints, you will create dummy variables just as in the case of one break-point. I will do a video on that in due course.
Hello Dr. How are you today? Thank you for all that you do for us. Just to be sure of what you did in this video. I guess you examined the structural break in the dependent variable and created a dummy variable for it and also interacted it with the independent variables? Does it matter if the independent variables individually have their own structural breaks? I am also working on an ARDL method. I look forward to hearing from you soon.
@@CrunchEconometrix Then please one more question concerning the ARDL, is it a must I make each of my variable a dependent variable during my analysis?
Good day, ma. Thank you for all you do. You have really helped me to get much acquainted with econometrics analysis. Kudos to you ma. I need your assistance on how to overcome error message "specification leads to singular matrix in atleast one sub sample" I always encountered whenever I want to run chow break point test? Thank you for your prompt response.
Thanks, Musa for the encouraging feedback...deeply appreciated. "Singular matrix..." indicate the presence of multicollinearity. Kindly watch my video on "MULTICOLLINEARITY" to get ideas on how to correct it. Regards.
Hello Prof .I am a new subscriber for your channel. I have stated watching cruncheconometrix. Thank you for your content. I want to know how to apply chow test for the multiple break points. if you have any videos on that kindly upload. It will be of great use. Thank you
Thanks Keshav, for the encouraging feedback on my videos. Deeply appreciated! I'm not quite sure if Chow test can handle double breaks but I know there are several tests like Zivot-Andrews, Gregory-Hansen etc. Simply do a Google search.
Hello, Kristian from the UK Thank you for your video, it was really really helpful. Your explanations are easy to understand and intuitive. Once that I have discovered the breaks (I have two years) and have interacted them with the variables what is the next step. I would like to construct an ARDL model as my variables have different order of integration. Is this possible? Please let me know as soon as possible. Thank you very much
Hi Kristian, thanks for the positive feedback on my video. Deeply appreciated! This video performed the Chow test using the ARDL model. Simply follow my guide and watch my supplementary ARDL videos. Thanks
@@CrunchEconometrix Once again thank you for all the videos, definately a godsend. I am very new to this so i need all the help i could get. Once you have generated the dummy variable and interacted it with the regressors you use Least Squares as an estimation method. Is that considered an ARDL? PS I have seen all your videos on ARDL and I still dont understand how it all fits together.
@@kristiangradev1306 Apply the knowledge gained. Simply select ARDL and continue from there. Note that the dummies will be listed in the exogenous section and estimate the model.
I trust you are doing well. My research interests is on forecasting of Tourist Arrivals. I attempted to perform long-term forecasting i.e., from 2019-2031. The data is available from 2008 to 2021, however, the pandemic years 2019-2021 data is not credible for forecasting. I have eliminated 2019-2021 to demonstrate the pre-pandemic normal tourism arrivals in 2031. Used Decomposition, Box Jenkins, and Holt Winter's and validated the accuracy using RMSE, MAPE, and Theil'd U coefficients. However, I have recently received a comment from the research community that "MAPE should not represent the forecasting performances from 2019-2031." Could you please help me understand the reason for this comment as to why MAPE is not suitable for forecast accuracy estimations?
Hello, I am checking for cointegration in WTI and Brent which I have found to be cointegrated. I as well want to check whether the price differential can be traded, Can I use the structural breaks to determine this and if yes how to I please interpret the results? Thank you. kindest regards, Dennis.
Hi Dennis, structural break analysis as explained in this clip is deployed only when a break is observed in the dependent variable. If that is the case, then you can use this, otherwise, find the most applicable technique to estimate the model. Hope this clarifies, thanks.
Hi, thanks for the nice video. Is it possible to use the chow test in an ADRL model? Meaning that, if it is possible to check for breakpoints and then creating a dummy for the ADRL model using the results of the chow breakpoint test.
Good evening Dr. I observed that this video bothered on when a structural break is observed on the dependent variable. What happens when a structural break is observed on an independent variable (alongside the dependent variable)? Do you create a dummy variable for it also and apply as illustrated or do you ignore and work on only the dependent variable? Your response will be highly appreciated. Thanks
Thank you madame for your video who help me in many work analysis. Please i ask you also to make the simulation analysis from the Beta and sigma convergence in the panel model. Thank you some must
Thank you for your explination …. I have one question please. After detecting structural break using the Chow's test , how then carry on my cointegration test ?
Hi Jana, thanks for the positive feedback on my video. Deeply appreciated! I'm familiar with the Gregory-Hansen test for cointegration in Stata. You may watch my video on it. May I know from where (location) you are reaching me?
Hi Abhijit, I have penned down the video on multiple structural break for the Teachable platform. In the meantime, you may want to check out other online resources. Thanks
Hello madame, and thank you for your video which as been helpfull to me. However, I have tested for chow break point and my understanding is not clear. If the fisher probability is greater than 0%, does it mean there is no break points (accepting the null hypothesis)? For example my fisher probability is 0.0040 . Are my data contain structural break?
@@CrunchEconometrix Okay thank you. When I plotted the CUMSUM OLS there was nobreak, and i plotted the cumulative sum of recursive residuals, and there it showed a break point (part of the blue line out of the red line) in 1998. However, I was using the VECM (with 8 variable on a period of 47,One co-integrating vector and I(1).) Is it still possible to continue with VECM after I created a dummy variable and interract with all regressors (as you've done in the video)? Or there is a another model or technique I should adopt when there is a break point?
@@kashyal1348 At this point, VECM is not advisable use ARDL-ECM and follow the techniques given in this video. However, 8 variables are too many...reduce them.
Thank you prof. u explained very well, but How we can do if we have multiple structural Break . pleas prof. could you make another video for Multiple break point tests in EViews10? thanks in advance
Abdo AL-Barakani thanks Abdo, for the encouraging remarks. I'm actually working on that both with EViews and Stata applications. Very soon, they'll be online... Thanks again!
Hi Prof, I added the dummy variable from the time when the structure break till last, after adding the dummy variables, still my model is unstable? How can i fix it? Please assist. Thanks.
Hi Imran, there are several suggestions to fix this which you can explore. (1) identify if there's another break and create a dv for it, (2) change an explvar and replace with a close proxy, (3) change the functional form of the model i.e. level-level, log-log, log-level. Experience has shown that model stability is sensitive to these changes.
No I did not because this tutorial is just to show the procedures for performing the Chow test. Of course, for the "real" analysis, the stationary of the variables must be ascertained. If you observe, the DW statistic is very low evidencing that the series are nonstationary.
Dr. Good evening. after creating a dummy variable and interacting it with my regressors, I ran the estimation and I was getting this error message "Near singular matrix error. Regressors may be perfectly collinear". pls, what does it imply? thanks
Evidence of multicollinearity. Run your correlation analysis to observe the statistics between the variables and drop the highly collinear variable from the model.
Hello Ma, Thank you for your very explanatory and intuitive videos, they have been really helpful. My questions are: when i have say, 5 to 7 variables, from which i notice about 2 structural breaks in some of them.. 1. Do i create a dummy for each break and interact them with all explanatory variables regardless of the how many they are or the break test is only required for the dependent variable as in this example? 2. In the presence of a structural break in a variable, do the common ADF and PP tests of stationarity hold? I really need your assistance. Thank you in advance.
Hi Alhassan, thanks for the positive feedback and kind remarks about my UA-cam videos. Deeply appreciated! (1) In the presence of structural breaks the usual ADF and PP unit root tests (URTs) are not applicable. There are several URTs that can be used in this case. Please do some search to find out more. (2) I'm only familiar with breaks in the dependent variable so may not be able to advise you correctly on this query regarding breaks in explanatory variables. Please may I know from where (location) you are reaching me?
Thank you for your reply. I'm a Nigerian but reaching you from Japan. 1. I have found ways of conducting the unit root tests with breaks and your video on Gregory and Hansen for a single break cointegration also helped. 2. I am still working on the second issue of including dummies for explanatory variables. Thank you very much.
@@Bin_hood001, hi! Your post was made 2 years ago. I was wondering if you've already figures out how to do this. From my reading, a dummy variable for each break can be added to each endogenous variable. I saw this from Juhro et al. (2022). My difficulty at the moment lies on the final step, that is, how to compute the adjusted variable. I cannot seem to generate the adjusted variable the correct way. Thanks! "Hence, we proceed with our analysis by filtering the identified structural breaks, in tion to the crisis period of 1997-1998, from the data. In other words, the variables are adjusted for structural breaks. The filtering process proceeds as follows. First, we create a dummy variable for the structural breaks for each variable. Second, we estimate a simple regression of the variable on an intercept term and the dummy variable. Finally, we compute the adjusted variable (adjusted for the new structural break) by adding the error term generated from the regression to the model‘s intercept term." @CrunchEconometrix , any idea? Your videos have helped me a lot! Thanks!
@@juliebasconcillo Hi. In my case, i ended up creating dummy for only the dependent variables and interacting the dummy with my main explanatory variable. As to the adjustment of the explanatory variables with structural breaks, I really have no idea how that works. Good luck with your research
UA-cam recently changed the way my content will be monetised. My channel now needs 1,000 subscribers. So it would be amazing if you show your support by both watching my videos and subscribing to my channel if you haven’t done so already. Monetising my videos allows me to invest back into the channel with some new equipment so this small gesture from you will be extremely huge for me. Many thanks for your support….CrunchEconometrix loves to teach, help me stay online.
crunch Econometrics, pls, add video for lstar and estar for finding threshold level
@@haripaudel2615 I have no idea about the procedure, at the moment.
Thank you so much, your explanations are very clear.
U're welcome 🙏
Aunty, greetings from London. Thanks for this. You're supporting me score high marks on my Masters in International Finance!
Wonderful, Mac...glad to be of help! Good luck on your program.
You are the best teacher ever thank you so much for all your knowledge
You're very welcome, Erika!
Once again - amazing content! Thanks so much CrunchEconometrix!! 🌹
Thanks for the encouragement, NN! 💕 😊
Thank you very much ma. You've made Econometrics so easy for me.
U're welcome, Daniel. Thanks for the encouraging feedback. Please may I know from where (location) you are reaching me?
great tutorial! thanks a lot. God bless you
Glad it was helpful!
Thank you so much, Madam.
U're welcome, Adeola! 🥰🙏
Thanks for this enriching tutorial on chow test. I really learnt a great deal. I followed the entire process in doing my own analysis and it worked perfectly well up until when I added dummy variables as an interaction term to the main regressors in my model. Then trying to run the analysis, the result said: singular matrx. This has always happened whenever I used dummy variables in my regression. How do I overcome this?
Hi Nwakanwa, the way you interact variables may cause multicollinearity.
great stuff prof
Thanks for the encouragement, Sir Norman!
Thank you, I'm about to do my exam. This was very helpful
U're very welcome, Josh! 💖
Thank you Madam.
Madam, I got the CUSUM os squares test significant after using dummy variables. After that what should I do with my model ?
Aditya, I don't quite understand your query.
This is great, but how do I create the dummy before and after structural breakpoints if I have two breakpoints? Suppose I have a dataset from 1995 to 2020 and two breaks in 2003 and 2010. So before 2003, I had to put 0; after 2003, it had to be 1, but again, I had to put before 2010. So please help me.
You are correct on the 1st break point. For the 2nd, put 0 from 1995 to 2009, and 1 from 2010 to 2020. The break dummies will be in different columns. This would be very easy in Stata. Never tried it in EViews.
Thank you for the help ma. God bless
Mam thank you very much for making such kind of excellent vidoes i leant a lot from these vidoes,and downdload the vidoes..stay always bless..afsar uddin from pakistan.
Thanks Afsar, for the positive feedback and remarks on my UA-cam videos. Deeply appreciated! Kindly assist me in sharing the link to my UA-cam Channel with your friends and academic community in Pakistan 🇵🇰. They will find the content helpful too. God bless you as you do, amen 🙏
Thank you so much :)
You are welcome, Dilara☺️
How to creat the dummy variable and interact it with other regressors ? Is there any video that i missed ?
This video explains just that. Detailed videos on DUMMY VARIABLES are on my Teachable paid platform cruncheconometrix.teachable.com
Do structural breaks exist for panel data? I am conducting panel cointegration analysis for 9 countries over the period (1992-2015). My model contains 7 variables. I performed two unit root tests (the ADF and the PP), for the variables, the results were mixed. According to the ADF, the two variables are non-stationary at level, while according to the PP, the two variables are stationary at level. How can I take my decision ?
Hi Menna, I have engaged structural break analysis using a panel data. You may need to check other online resources. Thanks.
Which hypothesis test can help me to know how to specify the model correctly? How to test whether the specification should be with break in the intercept, break in the slopes or in the intercept and slopes?
Hi Leonela, you may need to watch my other videos on structural break analysis. Also, read the recommended articles listed at the end of the videos. Thanks
Thanks for such an informative video. I did the same however my Model is ARDl. After applying necessary chow test requirements., My break point has shifted to a new point...what to do?
Run the CUSUMSQ test. If it lies within the 5% boundary then the model is o, otherwise factor in the new break date and re-estimate.
thanks a lot! this video is very helpful and intuitive!
U're welcome, Biotech!...May I know from where (location) you are reaching me from?
@@CrunchEconometrix Yes, I'm an audition from Iran.
Alright, Bio Tech kindly share my Channel link with the Iranian academic community. Thanks!
thank you for the video! i followed your steps exactly, but the model is not stable yet. what should i do ?
Hi Arfa, you may want to change some control variables and play around the lag lengths.
@@CrunchEconometrix thank you! i changed the period and it worked
Hi mam, Even though attining the stablity in model, when have serial autocorrelation in the data. how to handle serial autocorrelation?
Hi Vishnu, you can increase the lag length and re-estimate the model.
This tutorial was very useful and was very help me lots. But I am still need your help and I am still strugling on running SVAR either on stata or eviews. Can you please help make a video on Structural VAR (SVAR) model include data construction for this model? Thank you very much in advance Prof.
Hi Tobatoba, thanks for the positive feedback. Deeply appreciated. SVAR is quite technical but I've penned it down for future assignments which will be uploaded to my Teachable paid platform. You can sign up or enroll with $200 to access all videos published in the School cruncheconometrix.teachable.com. Thanks.
Haloo
I'm from indonesia. First, thank you for sharing your knowledge in here and these is very helpful. And I wanna ask, in your video, you took an DLNDC and DSEDU.. How could you get those variable? Thank you 😊
Your videos very
Hi Amelia, thanks for the positive feedback on my videos. Deeply appreciated. Go to QUICK, GENERATE SERIES, in the equation box, type: dlndc = d(lndc), OK. Do same for all variables of interest....and nice to hear from Indonesia too!
Thanx for the video. Do you mean here the structural breakpoint is tested for the independent variable only? what if we have more than 2 breakpoints ?
No. It is tested on the DEPENDENT variable. If there are 2 breakpoints, you will create dummy variables just as in the case of one break-point. I will do a video on that in due course.
MAY GOD BLESS YOU
...and you too, Victory! 🙏 ❤️
Hello Dr. How are you today? Thank you for all that you do for us. Just to be sure of what you did in this video. I guess you examined the structural break in the dependent variable and created a dummy variable for it and also interacted it with the independent variables? Does it matter if the independent variables individually have their own structural breaks? I am also working on an ARDL method. I look forward to hearing from you soon.
Structural break analysis focuses on the depvar...to the best of my knowledge.
@@CrunchEconometrix Thank you so much. I do really appreciate you.
@@CrunchEconometrix Then please one more question concerning the ARDL, is it a must I make each of my variable a dependent variable during my analysis?
Not at all. I explained why I did that.
@@CrunchEconometrix Thank You Dr.
Very well explained
...thanks for the kind remarks, Feyi
Good day, ma. Thank you for all you do. You have really helped me to get much acquainted with econometrics analysis. Kudos to you ma. I need your assistance on how to overcome error message "specification leads to singular matrix in atleast one sub sample" I always encountered whenever I want to run chow break point test? Thank you for your prompt response.
Thanks, Musa for the encouraging feedback...deeply appreciated. "Singular matrix..." indicate the presence of multicollinearity. Kindly watch my video on "MULTICOLLINEARITY" to get ideas on how to correct it. Regards.
Hello Prof .I am a new subscriber for your channel. I have stated watching cruncheconometrix. Thank you for your content. I want to know how to apply chow test for the multiple break points. if you have any videos on that kindly upload. It will be of great use. Thank you
Thanks Keshav, for the encouraging feedback on my videos. Deeply appreciated! I'm not quite sure if Chow test can handle double breaks but I know there are several tests like Zivot-Andrews, Gregory-Hansen etc. Simply do a Google search.
Hello, Kristian from the UK
Thank you for your video, it was really really helpful. Your explanations are easy to understand and intuitive.
Once that I have discovered the breaks (I have two years) and have interacted them with the variables what is the next step. I would like to construct an ARDL model as my variables have different order of integration. Is this possible? Please let me know as soon as possible. Thank you very much
Hi Kristian, thanks for the positive feedback on my video. Deeply appreciated! This video performed the Chow test using the ARDL model. Simply follow my guide and watch my supplementary ARDL videos. Thanks
@@CrunchEconometrix Once again thank you for all the videos, definately a godsend. I am very new to this so i need all the help i could get. Once you have generated the dummy variable and interacted it with the regressors you use Least Squares as an estimation method. Is that considered an ARDL?
PS I have seen all your videos on ARDL and I still dont understand how it all fits together.
@@kristiangradev1306 Apply the knowledge gained. Simply select ARDL and continue from there. Note that the dummies will be listed in the exogenous section and estimate the model.
I trust you are doing well.
My research interests is on forecasting of Tourist Arrivals. I attempted to perform long-term forecasting i.e., from 2019-2031. The data is available from 2008 to 2021, however, the pandemic years 2019-2021 data is not credible for forecasting. I have eliminated 2019-2021 to demonstrate the pre-pandemic normal tourism arrivals in 2031. Used Decomposition, Box Jenkins, and Holt Winter's and validated the accuracy using RMSE, MAPE, and Theil'd U coefficients. However, I have recently received a comment from the research community that "MAPE should not represent the forecasting performances from 2019-2031."
Could you please help me understand the reason for this comment as to why MAPE is not suitable for forecast accuracy estimations?
Better for you to scout the literature about MAPE to know how to address the query.
Hello,
I am checking for cointegration in WTI and Brent which I have found to be cointegrated. I as well want to check whether the price differential can be traded, Can I use the structural breaks to determine this and if yes how to I please interpret the results? Thank you.
kindest regards,
Dennis.
Hi Dennis, structural break analysis as explained in this clip is deployed only when a break is observed in the dependent variable. If that is the case, then you can use this, otherwise, find the most applicable technique to estimate the model. Hope this clarifies, thanks.
Hi, thanks for the nice video. Is it possible to use the chow test in an ADRL model? Meaning that, if it is possible to check for breakpoints and then creating a dummy for the ADRL model using the results of the chow breakpoint test.
Hi Beatriz, thanks for the positive feedback. Deeply appreciatd! yes, that is possible. Isn't that what I did in the clip?
Great video, thanks ！
U're welcome, Sean. Please may I know from where (location) you are reaching me?
CrunchEconometrix From UK. :)
Awesome! Stay safe, Sean.
Thank you for your effort
Good evening Dr.
I observed that this video bothered on when a structural break is observed on the dependent variable. What happens when a structural break is observed on an independent variable (alongside the dependent variable)? Do you create a dummy variable for it also and apply as illustrated or do you ignore and work on only the dependent variable?
Your response will be highly appreciated. Thanks
Hi Kenechukwu, to the best of my knowledge, dependent variables are dealt with. You can also seek other online resources for more information. Thanks.
@@CrunchEconometrix OK. Thank you so much. I appreciate. Pls keep up the good work.
PS. You can also check for unit root breakpoint test to detect a breakpoint right?
Yes.
Thank you madame for your video who help me in many work analysis. Please i ask you also to make the simulation analysis from the Beta and sigma convergence in the panel model. Thank you some must
U're welcome, Vahor and thanks for the feedback. Kindly share my videos with your colleagues and academic community on social media...gracias! 💕 😊
U're welcome, Vahor and thanks for the feedback. Kindly share my videos with your colleagues and academic community on social media...gracias! 💕 😊
Thank you for your explination …. I have one question please. After detecting structural break using the Chow's test , how then carry on my cointegration test ?
Hi Jana, thanks for the positive feedback on my video. Deeply appreciated! I'm familiar with the Gregory-Hansen test for cointegration in Stata. You may watch my video on it. May I know from where (location) you are reaching me?
From Libya @@CrunchEconometrix
How to approch this when there are two or more break points in the series?
Hi Abhijit, I have penned down the video on multiple structural break for the Teachable platform. In the meantime, you may want to check out other online resources. Thanks
Hello madame, and thank you for your video which as been helpfull to me. However, I have tested for chow break point and my understanding is not clear. If the fisher probability is greater than 0%, does it mean there is no break points (accepting the null hypothesis)? For example my fisher probability is 0.0040 . Are my data contain structural break?
Yes data has a break. This video is simply and clearly explained. Watch it again and jot some notes while at it.
@@CrunchEconometrix Okay thank you. When I plotted the CUMSUM OLS there was nobreak, and i plotted the cumulative sum of recursive residuals, and there it showed a break point (part of the blue line out of the red line) in 1998. However, I was using the VECM (with 8 variable on a period of 47,One co-integrating vector and I(1).) Is it still possible to continue with VECM after I created a dummy variable and interract with all regressors (as you've done in the video)? Or there is a another model or technique I should adopt when there is a break point?
@@kashyal1348 At this point, VECM is not advisable use ARDL-ECM and follow the techniques given in this video. However, 8 variables are too many...reduce them.
Thank you prof. u explained very well, but How we can do if we have multiple structural Break . pleas prof. could you make another video for Multiple break point tests in EViews10? thanks in advance
Abdo AL-Barakani thanks Abdo, for the encouraging remarks. I'm actually working on that both with EViews and Stata applications. Very soon, they'll be online... Thanks again!
Hi Prof, I added the dummy variable from the time when the structure break till last, after adding the dummy variables, still my model is unstable? How can i fix it? Please assist. Thanks.
Hi Imran, there are several suggestions to fix this which you can explore. (1) identify if there's another break and create a dv for it, (2) change an explvar and replace with a close proxy, (3) change the functional form of the model i.e. level-level, log-log, log-level. Experience has shown that model stability is sensitive to these changes.
What about stationarity did you use stationary variables before doing estimation and show test ?
No I did not because this tutorial is just to show the procedures for performing the Chow test. Of course, for the "real" analysis, the stationary of the variables must be ascertained. If you observe, the DW statistic is very low evidencing that the series are nonstationary.
hi mam if we have large number of data about more than 7000 then how we use chow test for one break point
Hi Azhar, kindly watch this video on the procedures to follow. Thanks.
Dr. Good evening. after creating a dummy variable and interacting it with my regressors, I ran the estimation and I was getting this error message "Near singular matrix error. Regressors may be perfectly collinear". pls, what does it imply? thanks
Evidence of multicollinearity. Run your correlation analysis to observe the statistics between the variables and drop the highly collinear variable from the model.
@@CrunchEconometrix OK. Thanks
Hey
Can we run unit root test in the presence of structural break in panel time series data?
You can attempt it.
Hello Ma, Thank you for your very explanatory and intuitive videos, they have been really helpful. My questions are: when i have say, 5 to 7 variables, from which i notice about 2 structural breaks in some of them..
1. Do i create a dummy for each break and interact them with all explanatory variables regardless of the how many they are or the break test is only required for the dependent variable as in this example?
2. In the presence of a structural break in a variable, do the common ADF and PP tests of stationarity hold?
I really need your assistance. Thank you in advance.
Hi Alhassan, thanks for the positive feedback and kind remarks about my UA-cam videos. Deeply appreciated! (1) In the presence of structural breaks the usual ADF and PP unit root tests (URTs) are not applicable. There are several URTs that can be used in this case. Please do some search to find out more. (2) I'm only familiar with breaks in the dependent variable so may not be able to advise you correctly on this query regarding breaks in explanatory variables. Please may I know from where (location) you are reaching me?
Thank you for your reply. I'm a Nigerian but reaching you from Japan.
1. I have found ways of conducting the unit root tests with breaks and your video on Gregory and Hansen for a single break cointegration also helped.
2. I am still working on the second issue of including dummies for explanatory variables.
Thank you very much.
@@Bin_hood001, hi! Your post was made 2 years ago. I was wondering if you've already figures out how to do this. From my reading, a dummy variable for each break can be added to each endogenous variable. I saw this from Juhro et al. (2022). My difficulty at the moment lies on the final step, that is, how to compute the adjusted variable. I cannot seem to generate the adjusted variable the correct way. Thanks!
"Hence, we proceed with our analysis by filtering the identified structural breaks, in tion to the crisis period of 1997-1998, from the data. In other words, the variables are adjusted for structural breaks.
The filtering process proceeds as follows. First, we create a dummy variable for the structural breaks for each variable. Second, we estimate a simple regression of the variable on an intercept term and the dummy variable. Finally, we compute the adjusted variable (adjusted for the new structural break) by adding the error term generated from the regression to the model‘s intercept term."
@CrunchEconometrix , any idea? Your videos have helped me a lot! Thanks!
@@juliebasconcillo Hi. In my case, i ended up creating dummy for only the dependent variables and interacting the dummy with my main explanatory variable.
As to the adjustment of the explanatory variables with structural breaks, I really have no idea how that works.
Good luck with your research
@@Bin_hood001 thanks for the reply. Good to hear from you.
Please in order to use least squares with breaks method the variables should be stationary ????
I explained that to you.
My data fell into the 5% in the initial recursive estimate. So I don't need to create dummy variables. My F statistics is also 0.56
Gr8!, those are evidences in favour of the null hypothesis that the model has no significant break point.
However R^2 is still larger than DW so it is a spurious regression and not a good model ?
Definitely...not a good model.
OK can i have your email or how can i reach you. Tanks for help
You can reach me here. Post your comments and I'll do my best to respond.