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As an example, suppose we estimate a consumption function using quarterly data from 1947:1 to 1994:4 and specify 1973:1 as the first observation in the forecast period. The test reestimates the equation for the period 1947:1 to 1972:4, and uses the result to compute the prediction errors for the remaining quarters, and reports the following results:
Neither of the forecast test statistics reject the null hypothesis of no structural change in the consumption function before and after 1973:1.
If we test the same hypothesis using the Chow breakpoint test, the result is:
Note that both of the breakpoint test statistics decisively reject the hypothesis from above. This example illustrates the possibility that the two Chow tests may yield conflicting results.