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Detecting Multiple Changes in Persistence

Author

Listed:
  • Leybourne Stephen

    () (University of Nottingham, UK)

  • Kim Tae-Hwan

    () (Yonsei University)

  • Taylor A.M. Robert

    () (University of Nottingham, UK)

Abstract

This paper considers the problem of testing for and dating changes (at unknown points) in the order of integration of a time series between different trend-stationary and difference-stationary regimes. While existing procedures in the literature are designed for processes displaying only a single such change in persistence, our proposed methodology is also valid in the presence of multiple changes in persistence. Our procedure is based on sequences of doubly-recursive implementations of the regression-based unit root statistic of Elliott et al. (1996). The asymptotic validity of our procedure is demonstrated analytically. We use Monte Carlo methods to simulate both finite sample and asymptotic critical values for our proposed testing procedure and to simulate the finite sample behaviour of our procedure against a variety of single and multiple persistence change series. The procedure is shown to work well in practice. The impact of deterministic level and trend breaks on our procedure is also discussed. An empirical application of the procedure to interest rate data is considered.

Suggested Citation

  • Leybourne Stephen & Kim Tae-Hwan & Taylor A.M. Robert, 2007. "Detecting Multiple Changes in Persistence," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 11(3), pages 1-34, September.
  • Handle: RePEc:bpj:sndecm:v:11:y:2007:i:3:n:2
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    Citations

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    Cited by:

    1. Alfred A. Haug, 2014. "On real interest rate persistence: the role of breaks," Applied Economics, Taylor & Francis Journals, vol. 46(10), pages 1058-1066, April.
    2. Lee, Hwa-Taek & Yoon, Gawon, 2007. "Does Purchasing Power Parity Hold Sometimes? Regime Switching in Real Exchange Rates," Economics Working Papers 2007-24, Christian-Albrechts-University of Kiel, Department of Economics.
    3. Chen, Wei & Huang, Zhuo & Yi, Yanping, 2015. "Is there a structural change in the persistence of WTI–Brent oil price spreads in the post-2010 period?," Economic Modelling, Elsevier, vol. 50(C), pages 64-71.
    4. Juan Carlos Cuestas & Karsten Staehr, 2014. "The great (De)leveraging in the GIIPS countries. Domestic credit and net foreign liabilities 1998–2013," Bank of Estonia Working Papers wp2014-4, Bank of Estonia, revised 10 Oct 2014.
    5. José Julián Sidaoui & Carlos Capistrán & Daniel Chiquiar & Manuel Ramos Francia, 2009. "A Note on the Predictive Content of PPI over CPI Inflation: The Case of Mexico," Working Papers 2009-14, Banco de México.
    6. Antonio Noriega & Carlos Capistrán & Manuel Ramos-Francia, 2013. "On the dynamics of inflation persistence around the world," Empirical Economics, Springer, vol. 44(3), pages 1243-1265, June.
    7. Juan Carlos Cuestas & Fabio Filipozzi & Karsten Staehr, 2015. "Uncovered Interest Parity in Central and Eastern Europe: Sample, Expectations and Structural Breaks," Working Papers 2015014, The University of Sheffield, Department of Economics.
    8. repec:eee:intfin:v:50:y:2017:i:c:p:36-51 is not listed on IDEAS
    9. Noriega Antonio E. & Ramos Francia Manuel, 2008. "A Note on the Dynamics of Persistence in US Inflation," Working Papers 2008-12, Banco de México.
    10. S Coleman & K Sirichand, 2015. "Investigating Multiple Changes in Persistence in International Yields," Economic Issues Journal Articles, Economic Issues, vol. 20(1), pages 65-90, March.
    11. Simeon Coleman Author name: Vitor Leone, 2012. "Time-series characteristics of UK commercial property returns: Testing for multiple changes in persistence," Working Papers 2012/03, Nottingham Trent University, Nottingham Business School, Economics Division.
    12. Chen, Zhanshou & Jin, Zi & Tian, Zheng & Qi, Peiyan, 2012. "Bootstrap testing multiple changes in persistence for a heavy-tailed sequence," Computational Statistics & Data Analysis, Elsevier, vol. 56(7), pages 2303-2316.
    13. repec:bla:reviec:v:25:y:2017:i:4:p:695-710 is not listed on IDEAS
    14. Juan Carlos Cuestas & Karsten Staehr, 2015. "The Great Leveraging in the GIIPS Countries: Domestic Credit and Net Foreign Liabilities," Working Papers 2015012, The University of Sheffield, Department of Economics.
    15. Stan Hurn & Peter C B Phillips & Shuping Shi, 2015. "Change Detection and the Casual Impact of the Yield Curve," NCER Working Paper Series 107, National Centre for Econometric Research.
    16. Juan Carlos Cuestas & Fabio Filipozzi & Karsten Staehr, 2017. "Uncovered interest parity in Central and Eastern Europe: Expectations and structural breaks," Review of International Economics, Wiley Blackwell, vol. 25(4), pages 695-710, September.
    17. Juan carlos Cuestas & Barry Harrison, 2014. "Unemployment hysteresis in the EU15: Has anything changed?," Economics Bulletin, AccessEcon, vol. 34(4), pages 2308-2314.
    18. Hwa-Taek Lee & Gawon Yoon, 2013. "Does purchasing power parity hold sometimes? Regime switching in real exchange rates," Applied Economics, Taylor & Francis Journals, vol. 45(16), pages 2279-2294, June.
    19. Leone, Vitor & de Medeiros, Otavio Ribeiro, 2015. "Signalling the Dotcom bubble: A multiple changes in persistence approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 55(C), pages 77-86.
    20. Ghoshray, Atanu & Stamatogiannis, Michalis P., 2015. "Centurial evidence of breaks in the persistence of unemployment," Economics Letters, Elsevier, vol. 129(C), pages 74-76.
    21. Kejriwal, Mohitosh & Perron, Pierre, 2012. "A note on estimating a structural change in persistence," Economics Letters, Elsevier, vol. 117(3), pages 932-935.
    22. repec:eee:ecmode:v:68:y:2018:i:c:p:356-359 is not listed on IDEAS
    23. Noriega, Antonio E. & Ramos-Francia, Manuel, 2009. "The dynamics of persistence in US inflation," Economics Letters, Elsevier, vol. 105(2), pages 168-172, November.
    24. Fosten, Jack & Ghoshray, Atanu, 2011. "Dynamic persistence in the unemployment rate of OECD countries," Economic Modelling, Elsevier, vol. 28(3), pages 948-954, May.
    25. Juan Carlos Cuestas & Luis A. Gil-Alana & Paolo Jose Regis, 2014. "On the changes in the sustainability of European external debt: what have we learned," Bank of Estonia Working Papers wp2014-3, Bank of Estonia, revised 10 Oct 2014.

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