Unit root tests in the presence of an innovation variance break that has power against the mean break stationary alternative
We show that Perron's [Perron, P., 1990. Testing for a unit root in a time series with a changing mean. Journal of Business and Economic Statistics 8, 153-162] unit root test can be oversized when there is a break in the innovation variance. We propose a modified Perron test that maintains its size, and has power against the mean-break stationary alternative.
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Volume (Year): 79 (2009)
Issue (Month): 3 (February)
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- Perron, Pierre, 1997.
"Further evidence on breaking trend functions in macroeconomic variables,"
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- Perron, P., 1994. "Further Evidence on Breaking Trend Functions in Macroeconomic Variables," Cahiers de recherche 9421, Universite de Montreal, Departement de sciences economiques.
- Perron, P., 1994. "Further Evidence on Breaking Trend Functions in Macroeconomic Variables," Cahiers de recherche 9421, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- 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 153-162, 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.
- Brooks, Chris & Rew, Alistair G, 2002. "Testing for a Unit Root in a Process Exhibiting a Structural Break in the Presence of GARCH Errors," Computational Economics, Springer;Society for Computational Economics, vol. 20(3), pages 157-176, December.
- 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 301-320, July.
- Vogelsang, T.I. & Perron, P., 1991. "Nonstationary and Level Shifts With An Application To Purchasing Power Parity," Papers 359, Princeton, Department of Economics - Econometric Research Program.
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"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.
- Kim, Tae-Hwan & Leybourne, Stephen & Newbold, Paul, 2002. "Unit root tests with a break in innovation variance," Journal of Econometrics, Elsevier, vol. 109(2), pages 365-387, August.
- Serena Ng & Pierre Perron, 1997.
"Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power,"
Boston College Working Papers in Economics
369, Boston College Department of Economics, revised 01 Sep 2000.
- Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
- Leybourne, S J, 1995. "Testing for Unit Roots Using Forward and Reverse Dickey-Fuller Regressions," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(4), pages 559-571, November.
- Busetti, Fabio & Taylor, A M Robert, 2003. "Variance Shifts, Structural Breaks, and Stationarity Tests," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(4), pages 510-531, October.
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