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Regression-based Tests for a Change in Persistence

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Author Info

  • Stephen J. Leybourne
  • Tae-Hwan Kim
  • A. M. Robert Taylor

Abstract

We show that the minimal forward (reverse) recursive unit tests of Banerjee, Lumsdaine and Stock ["Journal of Business and Economics Statistics" (1992) Vol. 10, pp. 271-288] are consistent against the alternative of a change in persistence from "I"(0) to "I"(1) ["I"(1) to "I"(0)]. However, these statistics are also shown to diverge for series which are "I"(0) throughout. Consequently, a rejection by these tests does not necessarily imply a change in persistence. We propose a further test, based on the ratio of these statistics, which is consistent against changes either from "I"(0) to "I"(1), or vice versa, yet does not over-reject against constant "I"(0) series. Consistent breakpoint estimators are proposed. Copyright 2006 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Department of Economics, University of Oxford in its journal Oxford Bulletin of Economics and Statistics.

Volume (Year): 68 (2006)
Issue (Month): 5 (October)
Pages: 595-621

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Handle: RePEc:bla:obuest:v:68:y:2006:i:5:p:595-621

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Cited by:
  1. Xi Chen & Michael Funke, 2013. "Renewed Momentum in the German Housing Market: Boom or Bubble?," CESifo Working Paper Series 4287, CESifo Group Munich.
  2. Manuel Ramos Francia & Daniel Chiquiar & Antonio E. Noriega, 2007. "Time Series Approach to Test a Change in Inflation Persistence: The Mexican Experience," Working Papers 2007-01, Banco de México.
  3. Funke, Michael & Chen, Xi, 2012. "Real-time warning signs of emerging and collapsing Chinese house price bubbles," BOFIT Discussion Papers 27/2012, Bank of Finland, Institute for Economies in Transition.
  4. Taipalus , Katja, 2012. "Signaling asset price bubbles with time-series methods," Research Discussion Papers 7/2012, Bank of Finland.
  5. Antonio E. Noriega & Manuel Ramos Francia, 2009. "On the dynamics of inflation persistence around the world," Working Papers 2009-02, Banco de México.
  6. Noriega Antonio E. & Ramos Francia Manuel, 2008. "A Note on the Dynamics of Persistence in US Inflation," Working Papers 2008-12, Banco de México.

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