A joint test for structural stability and a unit root in autoregressions

Jean-Yves Pitarakis

Computational Statistics & Data Analysis, 2014, vol. 76, issue C, 577-587

Abstract: A test of the joint null hypothesis of parameter stability and a unit root within an ADF style autoregressive specification whose entire parameter structure is potentially subject to a structural break at an unknown time period is developed. The proposed test is a useful diagnostic tool for assessing the interactions of breaks and unit root type of nonstationarities in time series, in addition to offering a powerful device for detecting changes in persistence. As a byproduct the limiting behaviour of a related Wald statistic designed to test solely the null of parameter stability in an environment with a unit root is also obtained. These distributions are free of nuisance parameters and easily tabulated. The finite sample properties of the tests are assessed through a series of simulations, and an application to macroeconomic data illustrates their usefulness.

Keywords: Structural breaks; Unit roots; Nonlinear dynamics (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:csdana:v:76:y:2014:i:c:p:577-587

DOI: 10.1016/j.csda.2012.07.027

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