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Asymptotics for unit root tests under Markov regime-switching

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  • Giuseppe Cavaliere

Abstract

processes observationally equivalent and that unit root tests virtually have no power to detect stationary processes around switching trends, although autocorrelation-robust unit root tests are not affected by size distortions. Conversely, Markov switches in the mean of the transitory components do not change the usual asymptotic properties of the tests. Finally, it is shown that in large samples Markov-switching variances cause neither size distortions nor inconsistency of the tests. Copyright Royal Economic Society, 2003

Suggested Citation

  • Giuseppe Cavaliere, 2003. "Asymptotics for unit root tests under Markov regime-switching," Econometrics Journal, Royal Economic Society, vol. 6(1), pages 193-216, June.
  • Handle: RePEc:ect:emjrnl:v:6:y:2003:i:1:p:193-216
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    Cited by:

    1. David O'Toole, 2009. "Exchange Rate Forecasts and Stochastic Trend Breaks," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 7, january-d.
    2. Qin Xiao & Randolph Gee Kwang Tan, 2006. "Markov-switching Unit Root Test: A study of the Property Price Bubbles in Hong Kong and Seoul," Economic Growth Centre Working Paper Series 0602, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
    3. Cavaliere, Giuseppe, 2004. "Testing stationarity under a permanent variance shift," Economics Letters, Elsevier, vol. 82(3), pages 403-408, March.
    4. Randolph & Xiao Qin & Tan Gee Kwang, 2004. "Unit Root Tests with Markov-Switching," Econometric Society 2004 Australasian Meetings 145, Econometric Society.
    5. Kanas, Angelos, 2006. "Purchasing Power Parity and Markov Regime Switching," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(6), pages 1669-1687, September.
    6. Cavaliere, Giuseppe & Taylor, A.M. Robert, 2007. "Testing for unit roots in time series models with non-stationary volatility," Journal of Econometrics, Elsevier, vol. 140(2), pages 919-947, October.

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