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Nonlinearly testing for a unit root in the presence of a break in the mean

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  • Gluschenko, Konstantin

Abstract

This paper deals with testing a time series with a structural break in its mean for a unit root when the break date is known. A nonlinear (with respect to coefficients) test equation is used, providing asymptotically efficient estimates. Finite-sample and quasi-asymptotic empirical distributions of the unit root test statistics are estimated, comparing them with those associated with the Perron-type equations. Asymptotic distributions of the nonlinear test statistics are found to be the Dickey-Fuller distributions. The nonlinear test proves to have more power than the test based on the linear model.

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File URL: http://mpra.ub.uni-muenchen.de/678/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 678.

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Date of creation: Aug 2004
Date of revision: Sep 2005
Handle: RePEc:pra:mprapa:678

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Keywords: structural break; nonlinear regression; nonstandard distribution;

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  1. Alan Bartley, William & Lee, Junsoo & Strazicich, Mark C., 2001. "Testing the null of cointegration in the presence of a structural break," Economics Letters, Elsevier, vol. 73(3), pages 315-323, December.
  2. Perron, Pierre & Vogelsang, Timothy J, 1992. "Nonstationarity and Level Shifts with an Application to Purchasing Power Parity," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 301-20, July.
  3. Rappoport, Peter & Reichlin, Lucrezia, 1989. "Segmented Trends and Non-stationary Time Series," Economic Journal, Royal Economic Society, vol. 99(395), pages 168-77, Supplemen.
  4. Newey, W.K. & West, K.D., 1992. "Automatic Lag Selection in Covariance Matrix Estimation," Working papers 9220, Wisconsin Madison - Social Systems.
  5. Evans, G B A & Savin, N E, 1981. "Testing for Unit Roots: 1," Econometrica, Econometric Society, vol. 49(3), pages 753-79, May.
  6. Hansen, Bruce E, 1997. "Approximate Asymptotic P Values for Structural-Change Tests," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(1), pages 60-67, January.
  7. Peter C.B. Phillips, 1985. "Time Series Regression with a Unit Root," Cowles Foundation Discussion Papers 740R, Cowles Foundation for Research in Economics, Yale University, revised Feb 1986.
  8. Ulrich K. M¸ller & Graham Elliott, 2003. "Tests for Unit Roots and the Initial Condition," Econometrica, Econometric Society, vol. 71(4), pages 1269-1286, 07.
  9. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
  10. James G. MacKinnon, 1995. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Working Papers 918, Queen's University, Department of Economics.
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Cited by:
  1. Konstantin Gluschenko, 2010. "Price convergence and market integration in Russia," William Davidson Institute Working Papers Series wp999, William Davidson Institute at the University of Michigan.

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