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A simultaneous test of unit root and level change

Listed author(s):
  • Duk Bin Jun

    (Department of Management Science, Korea Advanced Institute of Science and Technology, Seoul, Korea)

  • Dae Keun Park

    (Department of Management Science, Korea Advanced Institute of Science and Technology, Seoul, Korea)

Registered author(s):

    Testing the existence of unit root and|or level change is necessary in order to understand the underlying processes of time series. In many studies carried out so far, the focus was only on a single aspect of unit root and level change, therefore limiting a full assessment of the given problems. Our study aims to find a solution to the given problems by testing the two hypotheses simultaneously. We derive the likelihood ratio test statistic based on the state space model, and their distributions are created by the simulation method. The performance of the proposed method is validated by simulated time series and also applied to two Korean macroeconomic time series to confirm its practical application. This analysis can provide a solution to determine the underlying structure of arguable time series. Copyright © 2009 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/for.1126
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    Article provided by John Wiley & Sons, Ltd. in its journal Journal of Forecasting.

    Volume (Year): 29 (2010)
    Issue (Month): 3 ()
    Pages: 301-312

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    Handle: RePEc:jof:jforec:v:29:y:2010:i:3:p:301-312
    DOI: 10.1002/for.1126
    Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/2966

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    1. Zivot, Eric & Andrews, Donald W K, 1992. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 251-270, July.
    2. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
    3. 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.
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