Testing for a Change in Persistence in the Presence of a Volatility Shift
Abstract
We consider the impact of a break in the innovation volatility process on ratio-based persistence change tests. We demonstrate that the ratio statistics used do not have pivotal limiting null distributions and that the associated tests display a considerable degree of size distortion with size approaching unity in some cases. In practice, therefore, on the basis of these tests the practitioner will face difficulty in discriminating between persistence change processes and processes which display a simple volatility break. A wild bootstrap-based solution to the identified inference problem is proposed and is shown to work well in practice. Copyright 2006 Blackwell Publishing Ltd.Download Info
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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): s1 (December)
Pages: 761-781
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Handle: RePEc:bla:obuest:v:68:y:2006:i:s1:p:761-781
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For corrections or technical questions regarding this item, or to correct its listing, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
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Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Halunga, Andreea G. & Osborn, Denise R. & Sensier, Marianne, 2009.
"Changes in the order of integration of US and UK inflation,"
Economics Letters,
Elsevier, vol. 102(1), pages 30-32, January.
- Andreea Halunga & Denise Osborn & Marianne Sensier, 2007. "Changes in the order of integration of US and UK inflation," The School of Economics Discussion Paper Series 0715, Economics, The University of Manchester.
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