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Joint Detection of Structural Change and Nonstationarity in Autoregressions

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  • Pitarakis, Jean-Yves

Abstract

In this paper we develop a test of the joint null hypothesis of parameter stability and a unit root within an ADF style autoregressive specification whose entire parameter structure is potentially subject to a structural break at an unknown time period. The maintained underlying null model is a linear autoregression with a unit root, stationary regressors and a constant term. As a byproduct we also obtain the limiting behaviour of a related Wald statistic designed to solely test the null of parameter stability in an environment with a unit root. These distributions are free of nuisance parameters and easily tabulated. The finite sample properties of our tests are subsequently assessed through a series of simulations.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 29189.

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Date of creation: Feb 2011
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Handle: RePEc:pra:mprapa:29189

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Keywords: Structural Breaks; Unit Roots; Nonlinear Dynamics;

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  1. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 20(1), pages 25-44, January.
  2. Bruce E. Hansen & Mehmet Caner, 1997. "Threshold Autoregressions with a Unit Root," Boston College Working Papers in Economics, Boston College Department of Economics 381, Boston College Department of Economics.
  3. Banerjee, Anindya & Lumsdaine, Robin L & Stock, James H, 1992. "Recursive and Sequential Tests of the Unit-Root and Trend-Break Hypotheses: Theory and International Evidence," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 10(3), pages 271-87, July.
  4. Donald W.K. Andrews, 1990. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 943, Cowles Foundation for Research in Economics, Yale University.
  5. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, Econometric Society, vol. 57(6), pages 1361-1401, November.
  6. Kim, Dukpa & Perron, Pierre, 2009. "Unit root tests allowing for a break in the trend function at an unknown time under both the null and alternative hypotheses," Journal of Econometrics, Elsevier, Elsevier, vol. 148(1), pages 1-13, January.
  7. David Harris & David I. Harvey & Stephen J. Leybourne & A. M. Robert Taylor, 2007. "Testing for a unit root in the presence of a possible break in trend," Discussion Papers, University of Nottingham, Granger Centre for Time Series Econometrics 07/04, University of Nottingham, Granger Centre for Time Series Econometrics.
  8. Bai, Jushan, 1998. "A Note On Spurious Break," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 14(05), pages 663-669, October.
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Cited by:
  1. Pitarakis, Jean-Yves, 2012. "Jointly testing linearity and nonstationarity within threshold autoregressions," Economics Letters, Elsevier, Elsevier, vol. 117(2), pages 411-413.

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