Structural Change in Swedish and Finnish Monthly Industrial Output Series
This chapter considers the hypothesis of no structural change in Swedish and Finnish industrial output series. The alternative hypothesis to a linear regression model is a rather flexible parametric form of structural change called smooth transition regression. Its parameters may thus be estimated if the null hypothesis is rejected. The null hypothesis may be tested without actually estimating the alternative using a simple F-test. The test procedure is derived in this chapter. The null hypothesis is rejected for both Swedish and Finnish autoregressions. There may be other reasons for rejection than structural change; however, a smooth transition model corresponding to the alternative is successfully estimated by nonlinear least squares for both countries. The results indicate that the structural change has been similar in both countries but has occurred in Sweden about a decade earlier than in Finland. The two time series are also found not to be cointegrated.
KeywordsExplosive Autocorrelation OECD
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