Testing and Estimating Structural Breaks in Time Series and Panel Data in Stata

TL;DR

This paper introduces the xtbreak command in Stata, a comprehensive tool for detecting, dating, and analyzing multiple structural breaks in time series and panel data, exemplified through COVID-19 and approval ratings studies.

Contribution

The paper presents a new Stata command, xtbreak, that enhances structural break analysis by detecting multiple breaks, estimating their locations, and providing confidence intervals, with practical applications.

Findings

Detected structural breaks in COVID-19 data and approval ratings.

Provided confidence intervals for break dates.

Demonstrated the tool's utility in real-world data analysis.

Abstract

Identifying structural change is a crucial step in analysis of time series and panel data. The longer the time span, the higher the likelihood that the model parameters have changed as a result of major disruptive events, such as the 2007--2008 financial crisis and the 2020 COVID--19 outbreak. Detecting the existence of breaks, and dating them is therefore necessary, not only for estimation purposes but also for understanding drivers of change and their effect on relationships. This article introduces a new community contributed command called xtbreak, which provides researchers with a complete toolbox for analysing multiple structural breaks in time series and panel data. xtbreak can detect the existence of breaks, determine their number and location, and provide break date confidence intervals. The new command is used to explore changes in the relationship between COVID--19 cases and deaths in the US, using both aggregate and state level data, and in the relationship between approval ratings and consumer confidence, using a panel of eight countries.