Hello
I have a simple question regarding structural break test in Eviews 8. I have 3 variables for which i want to separately carry out the structural break test. The 1st variable shows a linear trend, the 2nd shows a u shaped trend and the 3rd shows an inverse u shaped trend.
While estimating the equation (before the Bai and Perron structural break test)
for the linear trend i use the equation
dependent variable= c + t (where t is the trend)
for the u shaped trend i use the equation
dependent variable= c + t + tsquare
for the inverse u shaped trend i use the equation
dependent variable= c + tsquare + t
is this procedure correct or do i estimate the simple equation
dependent variable = c
in all three cases?
thank you
Bai and Perron Structural Break test
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