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Unit Roots And Multiple Structural Breaks In Real Ouput: How Long Does An Economy Remain Stationary?

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  • Antonio E. Noriega

    (University of Guanajuato)

Abstract

In recent literature on multiple structural change, the number of breaks is determined through a sequential test of parameter constancy. This paper explores the possibility of determining the number of breaks in a time series by relating structural breaks to the behavior of unit roots. Thus, rather than using the rule: stop adding breaks when the parameter variation form of nonstationarity is rejected, we examine the rule: stop adding breaks when the unit root form of nonstationarity is rejected. We use Monte Carlo studies to compare the performance of these two rules and find that the unit-root rule performs better for lower values of the autoregressive parameter. We illustrate the techniques in determining the number of breaks in Mexican real and real per-capita GDP series utilizing resampling methods.

Suggested Citation

  • Antonio E. Noriega, 2000. "Unit Roots And Multiple Structural Breaks In Real Ouput: How Long Does An Economy Remain Stationary?," Computing in Economics and Finance 2000 155, Society for Computational Economics.
    • Handle: RePEc:sce:scecf0:155
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