Likelihood Ratio Test for Change in Persistence

Anton Skrobotov (antonskrobotov@gmail.com)

Published Papers from Russian Presidential Academy of National Economy and Public Administration

Abstract: In this paper we propose a likelihood ratio test for a change in persistence of a time series. We consider the null hypothesis of a constant persistence I(1) and an alternative in which the series changes from a stationary regime to a unit root regime and vice versa. Both known and unknown break dates are analyzed. Moreover, we consider a modication of a lag length selection procedure which provides better size control over various data generation processes. In general, our likelihood ratio-based tests show the best nite sample properties from all persistence change tests that use the null hypothesis of a unit root throughout.

Keywords: change in persistence; likelihood ratio test; unit root test; lag length selection (search for similar items in EconPapers)
JEL-codes: C12 C22 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2015-01-28
New Economics Papers: this item is included in nep-ecm and nep-ets
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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