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On CUSUM test for dynamic panel models

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Abstract

In this study, we consider the problem of testing for a parameter change in dynamic panel models with fixed effects. As a test, we suggest using the CUSUM test based on the score vectors and show that under regularity conditions, the test converges weakly to the supremum of a Gaussian process. The test is then compared with the location-scale CUSUM (LSCUSUM) test through Monte Carlo simulation, showing its superiority to the LSCUSUM test. We also conduct a real data analysis using the real energy consumption data of OECD countries along with their GDPs for illustration.

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Acknowledgements

We would like to thank the two anonymous referees for their careful reading and constructive comments which considerably improved the quality of the paper. This research was supported by Basic Science Research Program through the National Research Foundation of Korea (NRF) funded by the Ministry of Science, ICT and Future Planning (No. 2018R1A2A2A05019433).

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  1. Department of Statistics, Seoul National University, Seoul, 08826, Korea

    Minyoung Jo & Sangyeol Lee

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  1. Minyoung Jo
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  2. Sangyeol Lee
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Correspondence to Sangyeol Lee.

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Jo, M., Lee, S. On CUSUM test for dynamic panel models. Stat Methods Appl 30, 515–542 (2021). https://doi.org/10.1007/s10260-020-00533-7

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