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Two simple tests of the trend hypothesis under time-varying variance

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  • Yang, Yang
  • Wang, Shaoping

Abstract

This paper investigates the effects of time-varying variance on the linear trend tests proposed by Harvey et al. (2007) (HLT) and Perron and Yabu (2009) (PY) and finds time-varying variance results in obviously different null distributions. We propose two new robust linear trend tests. An empirical application highlights the usefulness of our tests.

Suggested Citation

  • Yang, Yang & Wang, Shaoping, 2017. "Two simple tests of the trend hypothesis under time-varying variance," Economics Letters, Elsevier, vol. 156(C), pages 123-128.
    • Handle: RePEc:eee:ecolet:v:156:y:2017:i:c:p:123-128
    DOI: 10.1016/j.econlet.2017.04.030
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    3. James H. Stock & Mark W. Watson, 2005. "Implications of Dynamic Factor Models for VAR Analysis," NBER Working Papers 11467, National Bureau of Economic Research, Inc.
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    6. Harvey, David I. & Leybourne, Stephen J. & Taylor, A.M. Robert, 2009. "Simple, Robust, And Powerful Tests Of The Breaking Trend Hypothesis," Econometric Theory, Cambridge University Press, vol. 25(4), pages 995-1029, August.
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    11. Carlino, Gerald A. & Mills, Leonard O., 1993. "Are U.S. regional incomes converging? : A time series analysis," Journal of Monetary Economics, Elsevier, vol. 32(2), pages 335-346, November.
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    Cited by:

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    More about this item

    Keywords

    Linear trend; Time-varying variance; Unit root; Robust test;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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