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A Consistent Nonparametric Test of Ergodicity for Time Series with Applications

Listed author(s):
  • Domowitz, I.
  • El-Gamal, M.A.

We propose a set of algorithms for testing the ergodicity of empirical time series, without reliance on a specific parametric framework. It is shown that the resulting test asymptotically obtains the correct size for stationary and nonstationary processes, and maximal power against non-ergodic but stationary alternatives. The test will not reject in the presence of nonstationarity that does not lead to ergodic failure. The work is linked to recent research on reformulations of the concept of integrated processes of order zero, and we demonstrate the means to operationalize new concepts of "short memory" for economic time series. Limited Monte Carlo evidence is provided with respect to power against the non-stationary and non-ergodic alternative of unit root processes. The method is used to investigate debates over stability of monetary aggregates relative to GDP, and the mean reversion hypothesis with respect to high frequency data on exchange rates.

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File URL: http://www.ssc.wisc.edu/econ/archive/wp9716.pdf
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Paper provided by Wisconsin Madison - Social Systems in its series Working papers with number 9716.

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Length: 36 pages
Date of creation: 1997
Handle: RePEc:att:wimass:9716
Contact details of provider: Postal:
UNIVERSITY OF WISCONSIN MADISON, SOCIAL SYSTEMS RESEARCH INSTITUTE(S.S.R.I.), MADISON WISCONSIN 53706 U.S.A.

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  1. Bleaney, Michael & Mizen, Paul, 1996. "Nonlinearities in Exchange-Rate Dynamics: Evidence from Five Currencies, 1973-94," The Economic Record, The Economic Society of Australia, vol. 72(216), pages 36-45, March.
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