Testing for structural breaks in factor loadings: An application to international business cycle

This paper proposes the implementation of the SupWald test of Andrews (1993) to detect structural breaks in the loadings of a static factor model. The procedure is illustrated by testing for structural breaks in the common factors of GDP growth series for a sample of advanced countries from 1950 until 2006.

Research Highlights► SupWald test of Andrews (1993) may detect structural breaks in the factor loadings. ► Principal components provide consistent estimations of factors. ► Implementation of the SupWald test depends on the sample size and the error term. ► Application to common factors from GDP growth series locates some breaks.