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Bayesian Analysis of Deterministic Time Trend and Changes in Persistence Using a Generalised Stochastic Unit Root Model

  • Fuyu Yang

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    This paper makes use of the novel Generalized Stochastic Unit Root (GSTUR) model, Bayesian model estimation and model comparison techniques to investigate the presence of a deterministic time trend in economic series. The model is specified to allow for changes in persistence over time, such as shifts from stationarity I(0) to nonstationarity I(1) or vice versa. This uncertainty raises the crucial question about how sure one can be that an economic time series has a deterministic trend when there is a change in the underlying properties. Empirical analysis indicates that the GSTUR model could provide new insights on time series studies.

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    File URL: http://www.le.ac.uk/economics/research/RePEc/lec/leecon/dp07-11.pdf
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    Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 07/11.

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    Date of creation: Nov 2007
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    Handle: RePEc:lec:leecon:07/11
    Contact details of provider: Postal: Department of Economics University of Leicester, University Road. Leicester. LE1 7RH. UK
    Phone: +44 (0)116 252 2887
    Fax: +44 (0)116 252 2908
    Web page: http://www2.le.ac.uk/departments/economics
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    1. n/a, 2001. "Balance of payments prospects in EMU," NIESR Discussion Papers 164, National Institute of Economic and Social Research.
    2. Koop, Gary & Ley, Eduardo & Osiewalski, Jacek & Steel, Mark F. J., 1997. "Bayesian analysis of long memory and persistence using ARFIMA models," Journal of Econometrics, Elsevier, vol. 76(1-2), pages 149-169.
    3. Kapetanios, George & Shin, Yongcheol & Snell, Andy, 2003. "Testing for a unit root in the nonlinear STAR framework," Journal of Econometrics, Elsevier, vol. 112(2), pages 359-379, February.
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