Seasonal Unit Root Tests Under Structural Breaks
In this paper, several seasonal unit root tests are analysed in the context of structural breaks at known time and a new break corrected test is suggested. We show that the widely used HEGY test, as well as an LM variant thereof, are asymptotically robust to seasonal mean shifts of finite magnitude. In finite samples, however, experiments reveal that such tests suffer from severe size distortions and power reductions when breaks are present. Hence, a new break corrected LM test is proposed to overcome this problem. Importantly, the correction for seasonal mean shifts bears no consequence on the limiting distributions, thereby maintaining the legitimacy of canonical critical values. Moreover, although this test assumes a breakpoint a priori, it is robust in terms of misspecification of the time of the break. This asymptotic property is well reproduced in finite samples. Based on a Monte-Carlo study, our new test is compared with other procedures suggested in the literature and shown to hold superior finite sample properties. Copyright 2004 Blackwell Publishing Ltd.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 25 (2004)
Issue (Month): 1 (01)
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=0143-9782|
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=0143-9782|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Zivot, Eric & Andrews, Donald W K, 1992.
"Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 10(3), pages 251-70, July.
- 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, vol. 20(1), pages 25-44, January.
- Tom Doan, . "ZIVOT: RATS procedure to perform Zivot-Andrews Unit Root Test," Statistical Software Components RTS00236, Boston College Department of Economics.
- Eric Zivot & Donald W.K. Andrews, 1990. "Further Evidence on the Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Cowles Foundation Discussion Papers 944, Cowles Foundation for Research in Economics, Yale University.
- Paulo M. M. Rodrigues, 2002. "On LM type tests for seasonal unit roots in quarterly data," Econometrics Journal, Royal Economic Society, vol. 5(1), pages 176-195, June.
- Balcombe, Kelvin, 1999. " Seasonal Unit Root Tests with Structural Breaks in Deterministic Seasonality," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(4), pages 569-82, November.
- Smith, Jeremy & Otero, Jesus, 1997.
"Structural breaks and seasonal integration,"
Elsevier, vol. 56(1), pages 13-19, September.
- Smith, J. & Otero, J., 1995. "Structural Breaks and Seasonal Integration," The Warwick Economics Research Paper Series (TWERPS) 435, University of Warwick, Department of Economics.
- Hylleberg, S. & Engle, R.F. & Granger, C.W.J. & Yoo, B.S., 1988.
"Seasonal, Integration And Cointegration,"
6-88-2, Pennsylvania State - Department of Economics.
- Philip Hans Franses & Bart Hobijn, 1997. "Critical values for unit root tests in seasonal time series," Journal of Applied Statistics, Taylor & Francis Journals, vol. 24(1), pages 25-48.
- J. Breitung & P. H. Franses, 1996.
"On Phillips-Perron Type Tests for Seasonal Unit Roots,"
SFB 373 Discussion Papers
1996,27, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Breitung, J rg & Franses, Philip Hans, 1998. "On Phillips Perron-Type Tests For Seasonal Unit Roots," Econometric Theory, Cambridge University Press, vol. 14(02), pages 200-221, April.
- Philip Hans Franses & Timothy J. Vogelsang, 1998. "On Seasonal Cycles, Unit Roots, And Mean Shifts," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 231-240, May.
- Perron, Pierre, 1990.
"Testing for a Unit Root in a Time Series with a Changing Mean,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 8(2), pages 153-62, April.
- Perron, P., 1989. "Testing For A Unit Root In A Time Series With A Changing Mean," Papers 347, Princeton, Department of Economics - Econometric Research Program.
- Park, Joon Y. & Sung, Jaewhan, 1994. "Testing for Unit Roots in Models with Structural Change," Econometric Theory, Cambridge University Press, vol. 10(05), pages 917-936, December.
- Osborn, Denise R, et al, 1988. "Seasonality and the Order of Integration for Consumption," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 50(4), pages 361-77, November.
- Denise Osborn & Paulo Rodrigues, 2002. "Asymptotic Distributions Of Seasonal Unit Root Tests: A Unifying Approach," Econometric Reviews, Taylor & Francis Journals, vol. 21(2), pages 221-241.
- Perron, P, 1988.
"The Great Crash, The Oil Price Shock And The Unit Root Hypothesis,"
338, Princeton, Department of Economics - Econometric Research Program.
- Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
- Smith, R.J. & Taylor, A.M.R., 1999.
"Regression-Based Seasonal Unit Root Tests,"
99-15, Department of Economics, University of Birmingham.
- da Silva Lopes, Artur C. B., 2001. "The robustness of tests for seasonal differencing to structural breaks," Economics Letters, Elsevier, vol. 71(2), pages 173-179, May.
- Vogelsang, T.I. & Perron, P., 1991.
"Nonstationary and Level Shifts With An Application To Purchasing Power Parity,"
359, Princeton, Department of Economics - Econometric Research Program.
- 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.
- Amsler, Christine & Lee, Junsoo, 1995. "An LM Test for a Unit Root in the Presence of a Structural Change," Econometric Theory, Cambridge University Press, vol. 11(02), pages 359-368, February.
- Ghysels, Eric & Lee, Hahn S. & Noh, Jaesum, 1994. "Testing for unit roots in seasonal time series : Some theoretical extensions and a Monte Carlo investigation," Journal of Econometrics, Elsevier, vol. 62(2), pages 415-442, June.
- Franses, Philip Hans & Hoek, Henk & Paap, Richard, 1997.
"Bayesian analysis of seasonal unit roots and seasonal mean shifts,"
Journal of Econometrics,
Elsevier, vol. 78(2), pages 359-380, June.
- Franses, Ph.H.B.F. & Hoek, H. & Paap, R., 1995. "Bayesian Analysis of Seasonal Unit Roots and Seasonal Mean Shifts," Econometric Institute Research Papers EI 9527-/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
- Canova, Fabio & Hansen, Bruce E, 1995. "Are Seasonal Patterns Constant over Time? A Test for Seasonal Stability," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(3), pages 237-52, July.
- Schmidt, Peter & Phillips, C B Peter, 1992. "LM Tests for a Unit Root in the Presence of Deterministic Trends," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 257-87, August.
When requesting a correction, please mention this item's handle: RePEc:bla:jtsera:v:25:y:2004:i:1:p:33-53. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.