Regression-based Tests for a Change in Persistence
We show that the minimal forward (reverse) recursive unit tests of Banerjee, Lumsdaine and Stock ["Journal of Business and Economics Statistics" (1992) Vol. 10, pp. 271-288] are consistent against the alternative of a change in persistence from "I"(0) to "I"(1) ["I"(1) to "I"(0)]. However, these statistics are also shown to diverge for series which are "I"(0) throughout. Consequently, a rejection by these tests does not necessarily imply a change in persistence. We propose a further test, based on the ratio of these statistics, which is consistent against changes either from "I"(0) to "I"(1), or vice versa, yet does not over-reject against constant "I"(0) series. Consistent breakpoint estimators are proposed. Copyright 2006 Blackwell Publishing Ltd.
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Volume (Year): 68 (2006)
Issue (Month): 5 (October)
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