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Testing for Structural Breaks and other forms of Non-stationarity: a Misspecification Perspective

Author

Listed:
  • Maria Heracleous

    (American University)

  • Andreas Koutris

    (Virginia Tech)

  • Aris Spanos

    (Virginia Tech)

Abstract

In the 1980s and 1990s the issue of non-stationarity in economic time series has been in the context of unit roots vs. mean trends in AR(p) models. More recently this perspective has been extended to include structural breaks. In this paper we take a much broader perspective by viewing the problem as one of misspecification testing: assessing the stationarity of the underlying process. The proposed misspecification testing procedure relies on resampling techniques to enhance the informational content of the observed data in an attempt to capture heterogeneity `locally' using rolling window estimators of the primary moments of the stochastic process. The effectiveness of the testing procedure is assessed using extensive Monte Carlo simulations

Suggested Citation

  • Maria Heracleous & Andreas Koutris & Aris Spanos, 2006. "Testing for Structural Breaks and other forms of Non-stationarity: a Misspecification Perspective," Computing in Economics and Finance 2006 493, Society for Computational Economics.
  • Handle: RePEc:sce:scecfa:493
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    File URL: http://repec.org/sce2006/up.23205.1141620544.pdf
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    References listed on IDEAS

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    Keywords

    Maximum Entropy Bootstrap; Non-Stationarity;

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