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A Sequential Procedure for Testing Unit Roots in the Presence of Structural Break in Time Series Data: An Application to Quarterly Data of Nepal, 1970-2003

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  • Shrestha, M.B.
  • Chowdhury, K.

Abstract

Testing for unit roots has special significance in terms of both economic theory and the interpretation of estimation results. as there are several methods available, researchers face method selection problem while conducting the unit root test on time series data in the presence of structural break. this paper proposes a sequential search procedure to determine the best test method for each time series. different test methods or models may be appropriate for different time series. therefore, instead of sticking to one particular test method for all the time series under consideration, selection of a set of mixed methods is recommended for obtaining better results.

Suggested Citation

  • Shrestha, M.B. & Chowdhury, K., 2005. "A Sequential Procedure for Testing Unit Roots in the Presence of Structural Break in Time Series Data: An Application to Quarterly Data of Nepal, 1970-2003," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 2(2), pages 31-46.
  • Handle: RePEc:eaa:ijaeqs:v:2:y2005:i:2_4
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    File URL: http://www.usc.es/economet/reviews/ijaeqs224.pdf
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    References listed on IDEAS

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    1. Panicos O. Demetriades & Kul B. Luintel, 1997. "The Direct Costs Of Financial Repression: Evidence From India," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 311-320, May.
    2. Perron, Pierre, 1997. "Further evidence on breaking trend functions in macroeconomic variables," Journal of Econometrics, Elsevier, vol. 80(2), pages 355-385, October.
    3. 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.
    4. Robin L. Lumsdaine & David H. Papell, 1997. "Multiple Trend Breaks And The Unit-Root Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 212-218, May.
    5. Demetriades, Panicos O & Luintel, Kul B, 1996. "Banking Sector Policies and Financial Development in Nepal," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(2), pages 355-372, May.
    6. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
    7. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
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    Citations

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    Cited by:

    1. Min Bahadur Shrestha, Ph.D., 2006. "Testing for Unit Roots in Nepalese Macroeconomic Data," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 18, pages 1-19, April.
    2. Constantinos Alexiou & Persefoni Tsaliki & Hashim Rasha Osman, 2014. "Institutional Quality And Economic Growth: Empirical Evidence From The Sudanese Economy," Economic Annals, Faculty of Economics, University of Belgrade, vol. 59(203), pages 119-138, October –.
    3. George S. Naufal & Ismail H. Genc, "undated". "Structural Change in MENA Remittance Flows," Economics Working Papers 07-05/2013, School of Business Administration, American University of Sharjah.
    4. Mete FERIDUN, 2008. "Currency Crises In Emerging Markets: The Case Of Post-Liberalization Turkey," The Developing Economies, Institute of Developing Economies, vol. 46(4), pages 386-427.
    5. Muhammad Omer & Jakob De Haan & Bert Scholtens, 2015. "An empirical analysis of excess interbank liquidity: a case study of Pakistan," Applied Economics, Taylor & Francis Journals, vol. 47(44), pages 4754-4776, March.
    6. Hamid Raza & Gylfi Zoega & Stephen Kinsella, 2015. "Capital controls, financial crisis and the investment saving nexus:Evidence from Iceland," Working Papers 201518, Geary Institute, University College Dublin.

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