Regression-based Tests for a Change in Persistence
We show that the minimal forward (reverse) recursive unit tests of Banerjee, Lumsdaine and Stock ["Journal of Business and Economics Statistics" (1992) Vol. 10, pp. 271-288] are consistent against the alternative of a change in persistence from "I"(0) to "I"(1) ["I"(1) to "I"(0)]. However, these statistics are also shown to diverge for series which are "I"(0) throughout. Consequently, a rejection by these tests does not necessarily imply a change in persistence. We propose a further test, based on the ratio of these statistics, which is consistent against changes either from "I"(0) to "I"(1), or vice versa, yet does not over-reject against constant "I"(0) series. Consistent breakpoint estimators are proposed. Copyright 2006 Blackwell Publishing Ltd.
Year of publication: |
2006
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Authors: | Leybourne, Stephen J. ; Kim, Tae-Hwan ; Taylor, A. M. Robert |
Published in: |
Oxford Bulletin of Economics and Statistics. - Department of Economics, ISSN 0305-9049. - Vol. 68.2006, 5, p. 595-621
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Publisher: |
Department of Economics |
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