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Asymptotic behaviour of the CUSUM of squares test under stochastic and deterministic time trends

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  • Jouni Sohkanen

    ()
    (Dept of Economics, University of Oxford, Oxford)

  • B. Nielsen

    ()
    (Nuffield College, University of Oxford, Oxford.)

Abstract

We undertake a generalization of the cumulative sum of squares (CUSQ) test to the case of non-stationary autoregressive distributed lag models with quite general deterministic time trends. The test may be validly implemented with either ordinary least squares residuals or standardized forecast errors. Simulations suggest that there is little at stake in the choice between the two in the unit root case under Gaussian innovations, and that there is only very modest variation in the finite sample distribution across the parameter space.

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File URL: http://www.nuffield.ox.ac.uk/economics/papers/2009/w9/CUSQpaper.pdf
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Bibliographic Info

Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2009-W09.

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Length: 19 pages
Date of creation: 31 Aug 2009
Date of revision:
Handle: RePEc:nuf:econwp:0909

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Web page: http://www.nuff.ox.ac.uk/economics/

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  1. Deng, Ai & Perron, Pierre, 2008. "The Limit Distribution Of The Cusum Of Squares Test Under General Mixing Conditions," Econometric Theory, Cambridge University Press, vol. 24(03), pages 809-822, June.
  2. Bent Nielsen, 2003. "Strong consistency results for least squares estimators in general vector autoregressions with deterministic terms," Economics Series Working Papers 2003-W23, University of Oxford, Department of Economics.
  3. Ai Deng & Pierre Perron, 2005. "A Non-local Perspective on the Power Properties of the CUSUM and CUSUM of Squares Tests for Structural Change," Boston University - Department of Economics - Working Papers Series WP2005-047, Boston University - Department of Economics.
  4. Margaret M. McConnell & Gabriel Perez Quiros, 1998. "Output fluctuations in the United States: what has changed since the early 1980s?," Staff Reports 41, Federal Reserve Bank of New York.
  5. Lu, Xinhong & Maekawa, Koichi & Lee, Sangyeol, 2008. "The CUSUM of squares test for the stability of regression models with non-stationary regressors," Economics Letters, Elsevier, vol. 100(2), pages 234-237, August.
  6. Ploberger, Werner & Kramer, Walter, 1986. "On studentizing a test for structural change," Economics Letters, Elsevier, vol. 20(4), pages 341-344.
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Cited by:
  1. Bent Nielsen & Andrew Whitby, 2012. "A Joint Chow Test for Structural Instability," Economics Papers 2012-W07, Economics Group, Nuffield College, University of Oxford.

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