Unit Root Testing under a Local Break in Trend using Partial Information on the Break Date
type="main" xml:lang="en"> <title type="main">Abstract</title> <p>We consider unit root testing allowing for a break in trend when partial information is available regarding the location of the break date. This takes the form of knowledge of a relatively narrow window of data within which the break takes place, should it occur at all. For such circumstances, we suggest employing a union of rejections strategy, which combines a unit root test that allows for a trend break somewhere within the window with a unit root test that makes no allowance for a trend break. Asymptotic and finite sample evidence shows that our suggested strategy works well, provided that, when a break does occur, the partial information is correct. An empirical application to UK interest rate data containing the 1973 ‘oil shock’ is also considered.
Year of publication: |
2014
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Authors: | Harvey, David I. ; Leybourne, Stephen J. ; Taylor, A.M. Robert |
Published in: |
Oxford Bulletin of Economics and Statistics. - Department of Economics, ISSN 0305-9049. - Vol. 76.2014, 1, p. 93-111
|
Publisher: |
Department of Economics |
Saved in:
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