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Testing for Structural Breaks and other forms of Non-stationarity: a Misspecification Perspective

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Author Info
Maria Heracleous (American University)
Andreas Koutris (Virginia Tech)
Aris Spanos (Virginia Tech)
Abstract

In the 1980s and 1990s the issue of non-stationarity in economic time series has been in the context of unit roots vs. mean trends in AR(p) models. More recently this perspective has been extended to include structural breaks. In this paper we take a much broader perspective by viewing the problem as one of misspecification testing: assessing the stationarity of the underlying process. The proposed misspecification testing procedure relies on resampling techniques to enhance the informational content of the observed data in an attempt to capture heterogeneity `locally' using rolling window estimators of the primary moments of the stochastic process. The effectiveness of the testing procedure is assessed using extensive Monte Carlo simulations

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Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2006 with number 493.

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Date of creation: 04 Jul 2006
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Handle: RePEc:sce:scecfa:493

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Keywords: Maximum Entropy Bootstrap Non-Stationarity

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