School of Economics and Finance

No. 505: Detection of Structural Breaks in Linear Dynamic Panel Data Models

Stefan De Wachter , Queen Mary, University of London
Elias Tzavalis , Queen Mary, University of London

February 1, 2004

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This paper develops a break detection procedure for the well-known AR(p) linear panel data model with exogenous or pre-determined regressors. The test allows for a structural break in the slope parameters as well as in the fixed effects. Breaks in the latter are not constrained by any type of cross-sectional homogeneity and are allowed to be correlated with all past information.

J.E.L classification codes: C23

Keywords:Panel data, Structural break, Break detection