A new nonparametric stability test with an application to major Chinese macroeconomic time series |
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| Authors: | Nan Cai Zong-wu Cai Ying Fang |
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| Institution: | 13097. The Wang Yanan Institute for Studies in Economics, MOE Key Laboratory of Econometrics (Xiamen University), Fujian Provincial Key Laboratory of Statistical Science, Xiamen University, Xiamen, 361005, China
23097. Department of Mathematics and Statistics, University of North Carolina at Charlotte, Charlotte, NC, 28223, USA
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| Abstract: | In this paper, we propose a new test for testing the stability in macroeconomic time series, based on the LASSO variable selection approach and nonparametric estimation of a time-varying model. The wild bootstrap is employed to obtain its data-dependent critical values. We apply the new method to test the stability of bivariate relations among 92 major Chinese macroeconomic time series. We find that more than 70% bivariate relations are significantly unstable. |
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| Keywords: | LASSO stability test time-varying coefficients model wild bootstrap |
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