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Detecting Multiple Changes in Persistence

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Author Info

  • Leybourne Stephen

    ()
    (University of Nottingham, UK)

  • Kim Tae-Hwan

    ()
    (Yonsei University)

  • Taylor A.M. Robert

    ()
    (University of Nottingham, UK)

Abstract

This paper considers the problem of testing for and dating changes (at unknown points) in the order of integration of a time series between different trend-stationary and difference-stationary regimes. While existing procedures in the literature are designed for processes displaying only a single such change in persistence, our proposed methodology is also valid in the presence of multiple changes in persistence. Our procedure is based on sequences of doubly-recursive implementations of the regression-based unit root statistic of Elliott et al. (1996). The asymptotic validity of our procedure is demonstrated analytically. We use Monte Carlo methods to simulate both finite sample and asymptotic critical values for our proposed testing procedure and to simulate the finite sample behaviour of our procedure against a variety of single and multiple persistence change series. The procedure is shown to work well in practice. The impact of deterministic level and trend breaks on our procedure is also discussed. An empirical application of the procedure to interest rate data is considered.

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File URL: http://www.degruyter.com/view/j/snde.2007.11.3/snde.2007.11.3.1370/snde.2007.11.3.1370.xml?format=INT
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Bibliographic Info

Article provided by De Gruyter in its journal Studies in Nonlinear Dynamics & Econometrics.

Volume (Year): 11 (2007)
Issue (Month): 3 (September)
Pages: 1-34

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Handle: RePEc:bpj:sndecm:v:11:y:2007:i:3:n:2

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Web page: http://www.degruyter.com

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Cited by:
  1. Kejriwal, Mohitosh & Perron, Pierre, 2012. "A note on estimating a structural change in persistence," Economics Letters, Elsevier, vol. 117(3), pages 932-935.
  2. José Julián Sidaoui & Carlos Capistrán & Daniel Chiquiar & Manuel Ramos Francia, 2009. "A Note on the Predictive Content of PPI over CPI Inflation: The Case of Mexico," Working Papers 2009-14, Banco de México.
  3. Antonio Noriega & Carlos Capistrán & Manuel Ramos-Francia, 2013. "On the dynamics of inflation persistence around the world," Empirical Economics, Springer, vol. 44(3), pages 1243-1265, June.
  4. Fosten, Jack & Ghoshray, Atanu, 2011. "Dynamic persistence in the unemployment rate of OECD countries," Economic Modelling, Elsevier, vol. 28(3), pages 948-954, May.
  5. Chen, Zhanshou & Jin, Zi & Tian, Zheng & Qi, Peiyan, 2012. "Bootstrap testing multiple changes in persistence for a heavy-tailed sequence," Computational Statistics & Data Analysis, Elsevier, vol. 56(7), pages 2303-2316.
  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.
  7. Noriega, Antonio E. & Ramos-Francia, Manuel, 2009. "The dynamics of persistence in US inflation," Economics Letters, Elsevier, vol. 105(2), pages 168-172, November.

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