[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
  EconPapers    
Economics at your fingertips  
 

Modified Tests for a Change in Persistence

Robert Taylor, Stephen Leybourne () and David Harvey

No 64, Econometric Society 2004 Australasian Meetings from Econometric Society

Abstract: Being able to correctly characterise an observed time series into its separate difference stationary and trend stationary regimes, should they exist, has important implications for effective model building and forecasting in economics and finance. Existing ratio-based statistics test the null hypothesis that a time series displays constant trend stationarity, I(0), against the alternative of a change in persistence from trend stationarity to difference stationarity, I(1), or vice versa. Here, however, we demonstrate that these tests are unable to adequately discern between a true change in persistence and a constant I(1) process. We propose modified tests which, by design, have the same critical values regardless of whether the process is I(0) or I(1) throughout. Hence, our null hypothesis is that of constant persistence (either constant I(0) or constant I(1)). Tests directed against both I(1) to I(0) and I(0) to I(1) persistence changes are provided, together with tests where the direction of change under the alternative is unspecified. Our tests retain the same rates of consistency against persistence change processes as their unmodified counterparts. Simulation evidence suggests that our new procedures work extremely well in practice, with the modified tests correctly being sized in both constant I(0) and constant I(1) environments, and displaying only very modest losses in power, relative to unmodified tests, against persistence change process

Keywords: trend stationary; difference stationary; persistence change (search for similar items in EconPapers)
JEL-codes: C12 C22 (search for similar items in EconPapers)
Date: 2004-08-11
New Economics Papers: this item is included in nep-ecm and nep-ets
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://repec.org/esAUSM04/up.29774.1076503390.pdf (application/pdf)

Related works:
Journal Article: Modified tests for a change in persistence (2006) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecm:ausm04:64

Access Statistics for this paper

More papers in Econometric Society 2004 Australasian Meetings from Econometric Society Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum ().

 
Page updated 2024-12-28
Handle: RePEc:ecm:ausm04:64